Are you worried about leaving an inheritance to your loved ones and then having them pay tax on your legacy? No one likes to think about a time when they won’t be here, but the reality is that unfortunately some people aren’t prepared financially. Fairstone independent financial adviser Andy Fell looks at how IHT planning can help you to preserve your legacy.
As a nation, we are reluctant to talk about inheritance. Through estate planning, however, you can ensure your assets are given to the people and organisations you care about, and you can also take steps to minimise the impact of taxes and other costs on your estate.
Having built up their business or wealth, many families wish to enjoy it while also ensuring that it is passed on to the next generation in their families. Passing on what you have accrued in the most efficient way is of paramount importance. But some people find the idea of discussing passing on wealth uncomfortable.
Making decisions on your behalf
When someone dies, Inheritance Tax is charged on their estate above a certain value. A person’s estate is basically everything they own, including their main property, any other properties, cars, boats, life assurance policies not written in an appropriate trust and other investments, as well as personal effects such as jewellery.
Intergenerational planning helps you put financial measures in place to benefit your children later in life, and possibly even your future grandchildren, so it’s important to start planning early.
There’s a fundamental lack of awareness and understanding around Inheritance Tax, especially when it comes to how Individual Savings Accounts (ISAs) are treated after death. Given that some people have been able to amass over a million pounds in their ISAs, it’s an area where lack of knowledge could prove costly.
Forget the Lamborghini – 2.4 million UK grandparents[1] have either raided their pension to support their grandchildren or plan to in the future. According to research from LV=, a quarter of generous grandparents (25%) who have already given away money to their grandchildren[2] have taken the funds from their pension. A further one in six (16%) plan to use their pension for this reason once they reach retirement age.
Without professional advice and careful financial planning, HM Revenue & Customs (HMRC) can become the single largest beneficiary of your estate following your death. A recent survey about Inheritance Tax (IHT)[1] shows that wealthy Britons over the age of 45 are either ignoring estate planning solutions or they have forgotten about the benefits these can provide. Only 27% of those surveyed have taken financial advice on IHT planning, despite all of them having a potential IHT liability.
Effective estate planning can safeguard your wealth for future generations.
If you want to have control over what happens to your assets after your death, effective estate planning is essential. After a lifetime of hard work, you want to make sure you protect as much of your wealth as possible and pass it on to the right people. However, this does not happen automatically.
If you do not plan for what happens to your assets when you die, more of your estate than necessary could be subject to inheritance tax.
Unforeseen life events and circumstances can potentially impact your finances in a number of ways. We can help you to safeguard your wealth for future generations.
Although often in the news, Inheritance Tax (IHT) is still not widely understood. That’s worrying, because it affects thousands of families every year. If you thought IHT was just for extremely wealthy people to worry about, think again. The amount of IHT collected has doubled over the last five years[1].
