Minimising your Inheritance Tax liability: Doing what’s best for you and your loved ones
These days it’s easier than ever before to pass more of your wealth onto your children or grandchildren without it attracting a huge tax bill. But you will need to understand the rules.
Inheritance Tax (IHT) is currently paid at 40% on the value of any estate worth over £325,000 per person at the time of death. IHT is not applicable between spouses, but it is applicable when your estate passes on to your children or between co-habiting partners.
From April 2017 there is also a new “family home allowance”. This is called the Residence Nil Rate Band and it is being phased in over the next four years. In the current tax year (2018/19) it amounts to an additional £125,000 over the nil rate band and it will rise in each tax year by a further £25,000 until it reaches a total of £175,000. To qualify the property must be the main home (e.g. not a second home or a buy-to-let property) and it must be left to your children or grandchildren. Many people have written wills leaving their properties in trust and will therefore not be eligible for this allowance.
Remember it’s your beneficiaries who will need to pay any IHT, so you should look for ways to minimise the tax bill now.
Working with a Lasting Power of Attorney (LPA)
If there is a Lasting Power of Attorney in place it can be very difficult to plan how to pass on wealth to the next generation. In many instances this will be children acting on behalf of their parents. As an Attorney, you are unable to make gifts to family members, however, you can make certain investments which (after a qualifying period of 2 years) are exempt from IHT. The money remains in the name of the principle who will be able to access it easily should the need arise.
Please contact me today for an initial chat and to arrange a mutually convenient appointment to review your IHT plans. An initial meeting is free of charge and without obligation.