UK Inheritance Tax
Also known as Death Duties, Death tax, capital transfer tax, estate tax.
A definition
Lord Jenkins famously said in 1984 that Inheritance Tax is “…broadly speaking; a voluntary levy paid by those who distrust their heirs (family) more than they dislike the Inland Revenue”
Essential Steps to Mitigation
Step One – Ensure you have made wills or that your wills are up to date.
Step Two – Calculate the size & composition (i.e. property, deposits, investments, valuable belongings etc.) of your estate
Step Three – Utilize your annual allowances and exemptions to reduce any liability. Also ensure that any lifetime gifts/transfers (PETs) made have been covered against any potential IHT liability (– 7year rule).
Step Four - Equalize your estates to ensure that each spouse's Nil Rate Band is utilized on first death.
Step Five – Make provision to cover any outstanding IHT liability.
Step Six – Review any plans at least annually to ensure that any arrangements for mitigation are still relevant and current according to your circumstances and/or changes in legislation and tax laws.
Everything above the Nil Rate Band Threshold is taxed at 40%
Montpelier Bespoke Estate Planning Service
Many people believe planning to mitigate IHT is complicated, confusing and intrusive. The truth is that, depending on the circumstances and concerns of the individual – it can be as complicated or as simple as required.
From experience, it really depends on how important IHT mitigation is to the individual(s) concerned and how much they are care about paying (or not paying) this intrusive and (some would say) excessive levy. Hence any plans to mitigate are generally tailored to the instructions to the individual(s) concerned.
here are a number of methods for Estate Planning and indeed, the logical approach is rarely the only one taken. At Montpelier, we recognize this and offer our Clients an individually tailored approach that aims to provide them with solutions and ideas that take advantage of the knowledge and experience of our Tax and Trust specialists in a humane and considerate way.
