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Inheritance tax planning (IHT)

Without proper financial planning, the harsh reality is that HM Revenue & Customs could become the largest beneficiary of your estate following your death.

Wills, trusts & powers of attorney

Wills, trusts and lasting powers of attorney (LPAs) are the foundation of all inheritance and estate planning as they allow you to effectively plan your financial legacy.

Long-term care

Did you know that if you have assets of more than £23,250 (in England and Northern Ireland), £30,000 (Wales) and £26,250 (Scotland) you would not be entitled to financial assistance from your local authority towards your care fees?

As we continue to live longer lives, the cost of long-term care is something we should all be thinking about. Professional financial advice can help you make provisions for your care costs in later life.

Sharing your wealth with loved ones

You don’t need to wait until after you have gone to share your wealth with your loved ones. You may want to help parents with their long-term care costs, support a child with a deposit for their first home or pay the education fees for a grandchild.

Individuals are entitled to give away £3,000 in total, each tax year, free from inheritance tax. This allowance can be backdated by one year, so where the full £3,000 is not used, it can be carried forward to the next tax year.

Estate and inheritance planning that gives you financial control

Estate or inheritance (IHT) planning is the process of protecting your wealth after you have gone and ensuring you retain control over how your assets are distributed.

Your inheritance and estate plan should include everything of value to you, your home, car and jewellery, as well as your savings and investments and most importantly your family.

Estate planning covers:

  • Managing your tax obligations
  • Putting a comprehensive will in place that reflects your wishes
  • Creating a long-term care plan to provide for your future needs
  • Safeguarding the financial stability of your loved ones

Estate planning - your key questions, answered

Is estate planning relevant to me?

Estate planning is not just for the wealthy. Largely due to the enhanced value of homes in the UK, it is predicted that £400 billion will be passed from grandparents to the next generation over the next 10 years, the majority of which will be above the Inheritance Tax threshold.

Your Fairstone financial planner will work with you to estimate your potential Inheritance Tax obligations and provide you with tailored advice on how to manage these requirements.

Can a financial gift to a loved one be exempt from IHT?

Any gifts exceeding these amounts will be classed as potentially exempt transfers. If the person dies within seven years of making the gift, Inheritance Tax will be payable on a tapered basis. If the person making the gift lives for longer than seven years, the gift becomes fully exempt from Inheritance Tax.

There are many other gifting options that your Fairstone independent financial adviser can advise you on including:

  • Small gift exemptions
  • Marriage and civil partnerships gifts
  • Maintenance gifts
  • Bequests
  • Trusts

Do I need a power of attorney?

There may come a time when you are not physically or mentally able to make decisions regarding your finances or welfare. To protect you in this situation, you can entrust someone to manage your affairs for you if the need arises. This is called a lasting power of attorney.

If you lose the mental capacity to make your own decisions without a power of attorney in place, an application would need to be made to court for someone to be designated to act on your behalf. This can be time consuming and expensive, but most importantly, you would have no control over who was making decisions for you.

Fairstone’s estate planning experts can help you to appoint your power of attorney.

What are the tax implications of trusts?

The principle of trusts has been around for centuries when people would assign their assets and valued items to a trusted person — a trustee — before going to war. Today, trusts can still be a useful way of controlling and protecting family assets, especially as they can also work towards reducing the impact of inheritance tax.

There are many different types of trusts available although they are commonly used to secure funds for children until they come of age and to protect your home and those that live in it after you’ve gone.

Trusts are flexible and can be used to protect any of your assets. What makes them attractive is the control they offer you in managing what happens to your assets after your death.

The law and tax implications surrounding trusts is constantly changing and independent financial advice can help you understand the best trust option for you and your family.

Preserving your wealth for future generations

Inheritance can be an extremely complex and emotive area, but advanced planning and independent financial advice can help you leave a legacy for future generations. We all have one thing in common: we can’t take our assets with us when we die. If you want to ensure that your wealth is preserved for future generations and passed on efficiently, an estate plan is crucial. To discuss your situation, please contact us for more information.

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