Time to review your Inheritance tax position?
This year’s budget contained few surprises and, whilst the freezing of the Inheritance Tax (Nil Rate Band) for a period of four years could be regarded as a blow, it does not necessarily spell disaster for those prepared to undertake some longer term quality planning.
The use of various types of Trust is now commonplace as part of carefully planned solutions to this growing issue.
One of the major considerations of any estate plan is usually the delivery of long term ‘social impact protection’ benefits.
Using a trust can bring control to a family with the primary intention to protect assets not simply avoid tax. The latter of course is a fringe benefit in many scenarios.
With the freezing of the IHT allowance more families are likely to have to pay death taxes, even before the possible introduction of the recently announced flat 10% death duty for all.
Naturally this encourages people to consider more lifetime transfers of wealth and assets to their children. This may be effective, but often with less welcome side effects.
Caution should be exercised before embarking on a straight gifting strategy though as this action can simply pass the same tax issues you face to the next generation.
An even less palatable consequence is the potential that you pass half of the lifetime gift to the partner of the child, should they subsequently divorce.
Financial advice is perishable and this is one of those occasions when it pays to take some sound independent expert advice to review personal circumstances in the light of the potential impact of these budget issues.
Plans already in place may need tweaking to ensure they remain relevant and to ensure that you are making the most of the many opportunities to retain control, reduce the social impact of not planning comprehensively and maybe even saving some tax in the offing.