Patriotic - Home

 Inheritance-Tax-Planning

Isn’t it a scandal that prior to pressure arising from recent opinion polls, the Government was happy to collect this much tax from that section of the population that was ill-informed and poorly advised, whilst others with equal wealth could quite legitimately avoid paying up to Ł120,000 (Ł300,000 at 40%) in tax.

The chancellor is to be applauded for applying this to widows and widowers (it would have been cruelly unfair not to). Those who have planned efficiently will be unaffected, but a widow with a Ł600,000 house and only a Ł300,000 exemption will save Ł120,000.

The inheritance tax threshold is to rise to Ł350,000 per person in April 2010, giving couples a combined allowance of Ł700,000.

What planning is available to those with estates worth in excess of the exemptions outlined above?

Give assets away

If you can afford to do it, you may give away assets, providing you survive seven years after the gift the gift is exempt. Be aware that giving away an asset rather than cash may well create a capital gain and a different kind of tax liability.

If you can afford it you can also make gifts out of income, and this is immediately exempt from inheritance tax.

Invest in Business Property

There are investments which are exempt from inheritance tax. These include investments in AIM listed companies, agricultural or business assets. A residential property used for holiday lettings may qualify as a business. Professional advice should be taken before investing.

Domicile

Those taking up residence abroad should be aware that non resident does not remove your estate from UK inheritance tax. To do this one would need to become non-domiciled, is harder to achieve. It means severing ties with the UK, taking up permanent home in another country and demonstrating an intention to remain there.

Persons not born in the UK or those born in the UK but whose father was born elsewhere should take advice. They may not be UK domiciled, and many planning opportunities then are available.

Discounted Gift Plan

These products are offered by Life Insurance companies and are suited to those looking to:

* move some of the investment out of their estate immediately,
* receive fixed regular payments now with any remainder passing to their beneficiaries when they die.

The value of the estate is reduced from the start of the plan and if you survive seven years the investment is fully removed from the estate. You can receive a regular payment from the plan and then any remaining amount is paid to the beneficiaries on death.