Inheritance tax planning will minimise tax obligations and maximise the assets left by you that can then be passed to your preferred beneficiaries. Understanding the UK’s inheritance tax rules can help you appreciate the potential benefits of effective inheritance tax planning.
There currently exists a “Nil-Rate Band” of £325,000, meaning that if your estate is valued at less than £325,000 you will not have to pay inheritance tax. If your estate is worth more than this amount, you will have to pay tax on this – the rate being 40% of the value above the threshold of £325,000. As of 2017, the Government has introduced a “Residential Nil-Rate Band” for estates up to the value of £2 million. This will apply when a house is being passed onto children or grandchildren.
Both the Nil-Rate Band and the Residential Nil-Rate Band can be “transferred” to a spouse, meaning that if the deceased spouse leaves the whole of their estate to the surviving spouse, the surviving spouse’s tax-free allowance is effectively doubled. However, it should be noted that tax relief is not an automatic entitlement, and your Will should be updated to accurately reflect your wishes. The Estate Planning Solicitors at Wilford Smith can advise you on the current inheritance tax rules, and draft your Will accordingly so that you are able to ensure full relief from inheritance tax can be claimed.
In addition to having a professionally drafted Will to ensure that full inheritance tax relief can be claimed, trusts are a common method of reducing inheritance tax liabilities on death. A trust is a kind of partnership between: the settlor who creates the trust, the trustee who is responsible for the estate when the settlor dies, and the beneficiaries who will benefit from the estate. The settlor can create a trust for specific beneficiaries and purposes, for example to put money aside to cover university costs for their grandchildren. Depending on its type and when it is created, a trust can significantly reduce inheritance tax liabilities.
You can make gifts during your lifetime, however there are restrictions on when and how much of your estate you can gift. Gifts that are made in the seven years prior to your death will form part of your estate on death and will be liable for inheritance tax – although there are a number of exemptions that allow you to make certain gifts during this time. You should consult anEstate Planning Solicitors for guidance on this and all other aspects of inheritance tax planning.
Wilford Smith’s Estate Planning Team provides expert, practical advice on all areas of estate planning. Our Estate Planning Team is able to work with legal experts in other areas, such as our Property Solicitors, to give the best possible advice on inheritance tax planning. With a wide and varied client base, we are experienced in managing all different sizes of estate, from small to large to international. We take pride in our ability to provide clients with a high quality inheritance tax planning service that is tailored to their needs.
Our Estate Planning Solicitors are based in Sheffield and provide advice to clients across England and Wales. Contact us today on 0808 164 1349 to find out how we can help.