Wayne FLeming Will writing & Estate Planning
As individuals the final tax burden is Inheritance Tax, which is charged on the estate that is left behind.
Every year, the tax office receives billions of pounds from this tax. Like all taxes it can be managed and minimised where possible provided that the appropriate level of planning is undertaken at the correct time.
This tax has developed over the years with the last significant change taking place in April 2017, where additional reliefs were made available in respect of the family home – as ever with strict criteria needing to be met.
This is still a major consideration for many people both in terms of the tax position and to ensure that assets reach the intended people.
WHAT IS INHERITANCE TAX?
This is the tax charged on your estate in excess of your inheritance nil rate band, which is currently £325,000. This allowance will presently remain unchanged until 6 April 2021.
Your estate comprises of all the assets that you outrightly own; together with gifts made within the seven years leading up to your death.
Inheritance Tax arising on death is chargeable at 40% and this can be reduced to 36% if certain charitable gifts are left, which must be at least 10% of your total estate.
As well as the above nil rate band, there is an additional allowance in relation to your home, called the residential nil rate band. This is currently £125,000 and increases by £25,000 each year to reach £175,000 in April 2020. The conditions for this are that it is the family home and it is left to your children or grandchildren.
Any surplus of both the nil rate band and the residential nil rate band can be transferred between married couples and civil partners.
WHAT IS ESTATE PLANNING?
Estate planning is an exercise which involves evaluating your current estate; determining who you wish to inherit and formulating a way in which this can be best achieved.
All of this can be combined with an attempt to reduce the overall Inheritance Tax liability.
The end document of this process is a clear and concise Will. This should enable your executors to ensure that your wishes are followed; once probate has been obtained.
This may additionally involve a combination of outright gifts both during your life time and in your Will, as well as ensuring clear nominations are made for assets which do not fall into the Inheritance Tax regime.
In addition, consideration should be given to taking out Powers of Attorney which will enable those nominated to act on your behalf during your lifetime at a point when required.