Inheritance Tax Planning

What is Inheritance Tax Planning?

Inheritance Tax (IHT) is the tax paid to Her Majesty’s Revenue & Customs (HMRC) on a person’s estate (total assets or wealth held) on their death. IHT is also known as death duty or wealth tax.

Each person has a ‘nil rate band’ which is the amount of a person’s estate at or below which is exempt from IHT. The nil rate band can be revised from time to time by the Chancellor of The Exchequer. Currently in 2008/2009 the nil rate band is £312,000.

IHT is paid by the executors (where a will exists) or the administrator (where there is no will) of the deceased’s estate, and has to be paid prior to the distribution of the remaining assets to the deceased’s beneficiaries.

If the deceased has not made or does not have a valid will, then the remaining assets of the deceased estates will be distributed under the law of intestacy, which is a prescribed rule of succession.

Various allowances and exemptions are available that can be used to reduce the IHT liability.

IHT Planning is required to ensure that sufficient funds are available to pay the tax to allow the remaining assets to be distributed, as quickly and efficiently as possible to the estate’s beneficiaries.

Therefore, IHT Planning is the process of:

• Defining what and where the funds will come from to pay an inheritance tax liability: Flexible Trusts, Absolute Trusts, Discretionary Trusts, Whole of Life Insurance and Term Insurance policies.
• Utilising appropriate lifetime gifts and exemptions to reduce IHT liabilities: Potentially exempt transfers (PET’s), Lifetime gifts, Annual and Normal expenditure exemptions
• Making a will: Ensures the assets of the deceased’s estate are distributed according to the wishes of the deceased prior to their death, and not under the laws of intestacy.

Typically areas covered would include an individuals protection needs, retirement needs and saving and investment needs.

The process starts with a face to face meeting between the adviser/advisers and the individual client/clients to discover the clients current position and circumstances and their desired objectives. This is known as the confidential Fact Find.

Once the necessary information has been obtained, analysed and product solutions researched the appropriate actions can be taken to implement IHT plans.

Why should I consider Inheritance Tax Planning?

The major reason for recommending IHT Planning is to preserve the value of an individual’s estate, so that as much as possible of the assets value can be distributed to beneficiaries and dependants on the individual’s death.  

How do I prepare arrangements for IHT Planning?

The first and most important step after you have decided you may want to make arrangements for IHT Planning is to have a discussion with us to provide you with independent financial advice.

Once we have agreed what the most suitable type of arrangements are for your particular circumstances as part of the IHT planning process we make an application on your behalf to take out life insurance polices, and recommend the appropriate trusts and making of wills that match your objectives.

Want to know more?

Talk to one of our qualified financial advisers on 01553 777600 or e-mail us at enquiries@ringassociates.co.uk

Also you may want to read the articles associated with Inheritance Tax Planning from Directgov on their website at

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/InheritanceTaxEstatesAndTrusts/DG_10013054 and Her Majesty’s Revenue & Customs website at

http://www.hmrc.gov.uk/cto/customerguide/page1.htm

Also you may want to download the free booklet titled ‘Inheritance Tax’ from the Financial Services Authority website at http://www.fsa.gov.uk/financial_capability/pdfs/inheritance_tax.pdf