If the value of your savings, investments and possessions including your home could add up to over £350,000, your beneficiaries could be liable to Inheritance Tax on your death. Many in this position are aware their assets are likely to be subject to IHT yet somehow IHT planning doesn’t make it to the top of the to do list until late on in life. This, unfortunately, leaves many people underprepared and many estates end up paying more IHT than they would have if planning taken place earlier.
One IHT planning strategy where starting early is a clear advantage is gifting, where it takes seven years for the gift to be considered fully out of the estate. However, the long timeframe is also the thing that puts many people off; they are reluctant to make gifts not knowing what the future will bring. After all they may need the money later on, for example if they need to go into a care home.
If this is the reason for delaying IHT planning, it’s important to be aware there are several other IHT planning strategies that do not require giving up access to the money. These include loaning money instead of gifting it (the loan amount is invested and any growth is immediately IHT-free) or holding investments that qualify for Business Property Relief - typically shares in small companies, which are exempt from IHT after two years but can be sold at any point if access to the capital is required. Note the value of investments can go down as well as up and investors may not get back the full amount invested.
The risk of delaying IHT planning offers no obvious reward. The complicated nature of IHT rules is another deterrent; however, an independent financial adviser can recommend the best course of action. Please contact Richard Higgs CFP FPFS on 0117 966 5699 or firstname.lastname@example.org to get started with your IHT planning.