Inheritance Tax

Your hard-earned wealth is subject to Inheritance Tax (IHT) which depletes your estate you leave to your family. If you own your own house and have some savings, life assurance policies, or business assets, your estate could be liable. Planning ahead to minimise the liability to IHT is crucially important to ensure your family continue to enjoy your estate and DEB work with clients to plan long-term objectives to minimise the proportion of your wealth to be taken by the tax man.

How does IHT work?

When you die, IHT will be charged on your personal wealth, together with all or a proportion of your lifetime gifts made in the preceding seven years. Where a person’s estate is valued in excess of £325,000 for the years 2011/12 – 2014/15, it is taxed at a rate of 40{af331c3cb52abe27a47f1f5b71fb5068c938efb8d5a4e6cddc7f2780f48bb99c}.

Most gifts made during your lifetime will be entirely exempt from IHT if you live for seven years after making the gift but this exemtion is reduced on a sliding scale for gifts made between three and seven years before your death.

What do you need to consider?
  • The value of your assets now, and how this may change as time goes by
  • Your own financial security
  • Your family’s future needs
What do you need to consider?

The earlier you make a plan to deal with inheritance tax the better and the team at DEB would be delighted to work with you to consider the options most applicable to your own circumstances that would minimise your liability for IHT. Some of these strategies are:

  • Transfers of assets between spouses and civil partners are exempt from IHT, but other lifetime gifts may be more tax-efficient.
  • Lifetime gifts are potentially exempt from IHT, and there is no limit on such transfers, so this is an excellent way of transferring assets that you do not need to keep in your estate. It may be advisable to cover substantial gifts by insurance against death within seven years.
  • Trusts allow you to transfer assets out of your estate for IHT purposes, but enable trustees to exercise some degree of control over the capital or income (and you can be a trustee). There may be an IHT charge, but this would be at 20{af331c3cb52abe27a47f1f5b71fb5068c938efb8d5a4e6cddc7f2780f48bb99c}, and then only if the transfer is over £325,000.
  • Life assurance policies (unless designed to cover IHT liabilities) should be assigned during your lifetime so that the proceeds do not form part of your estate on death. The most common assignees are spouses, family members, and trusts.

We are living in an age of IHT planning opportunity. What you do is your decision, but the sooner you enlist our help the better.

Please feel free to contact us if you would like further help or advice on this subject .