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Planning for inheritance tax

PUBLISHED: 14:59 08 September 2014 | UPDATED: 14:59 08 September 2014

Without a proper will, people run the risk of their estate being severely reduced

Without a proper will, people run the risk of their estate being severely reduced

Archant

Will Skentelbery, of Skentelbery Wealth Management in Borehamwood, says there is a greater need to mitigate inheritance tax after the steep rise in property values

If you think you are unlikely to be affected by inheritance tax, think again. More and more people are affected every year. It used to be a tax that was the preserve of the very wealthy, but escalating property values in the past decade have changed that.

For single people, inheritance tax applies, at the top rate of 40 per cent, to assets worth more than £325,000. This threshold is known as the nil band rate. For married couples and civil partnerships, the threshold is £650,000. But the £650,000 limit applies only when assets are passed between spouses and civil partners. The figure reduces if any money is passed on to any benefactors during your lifetime.

There are also other financial implications to consider, particularly if you are a widow, widower or divorcée.

With the threshold remaining unchanged by the coalition government until at least 2015 and, subject to further legislation, the freeze extended up to and including the 2017/2018 tax year, more people could get sucked in, as the minimum tax threshold usually increases at a rate equivalent at least to inflation.

Beneficiaries, wills and trusts

The important thing is to ensure, perfectly legally, that as much of your estate as possible stays out of Her Majesty’s Revenue and Customs’ grasp – by seeking specialist, professional advice and careful planning.

Careful inheritance-tax planning is all about passing as much of the proceeds of an estate as possible to chosen beneficiaries rather than HMRC. It is also about maintaining flexibility and control over any arrangements that are made.

It is clear that people are confused by inheritance-tax policy and many mistakenly believe they are unlikely to be affected by it. And there is potentially a more serious knock-on effect.

A will is vital in helping mitigate the tax. Without a proper will, people run the risk of their estate being severely reduced and also leaving themselves exposed to the ravages of long-term care costs later in life. It’s now more important than ever to seek advice and establish how you can protect your hard-earned assets.

In addition to wills, trusts can also help you to protect and preserve your estate, as they allow you to give away assets but restrict or direct how and when they are used.

There are many different types of trust, some straightforward and others very complicated. A common use of a trust is to hold assets on behalf of children until they are old enough to look after their own money. However, it is vital to seek expert help before taking the plunge as there may be income-tax or capital-gains tax as well as inheritance-tax implications that need to be considered.

Managing wealth is a complicated business – it requires time, effort and knowledge that we often don’t have. To adopt the best strategies, there is no substitute for obtaining the professional advice of a specialist wealth- management expert.

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A free seminar discussing inheritance tax planning, the use of trusts and also current market conditions and opportunities will be held by Will Skentelbery in Stevenage on September 18 at 7pm. For further information on the seminar or to request a complimentary guide to inheritance tax, pensions and investments, call 07955310249 or email will.skentelbery@sjpp.co.uk

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