The Budget contained very little in respect of estate planning, apart from the introduction of an inheritance tax discount to benefit charities where part of the estate is left to a registered charity on death.
Where death occurs on or after 6th April 2012 and at least 10% of the value of the net estate has been left to a registered charity, a reduced rate of inheritance tax will apply.
This reduced rate is effectively a 10% discount off the standard 40% rate of inheritance tax, so a reduced rate of 36% rather than 40%.
To qualify for this reduced rate of inheritance tax, the 10% of the estate left to charity on death is calculated after the removal of any inheritance tax exemptions, reliefs and the available nil-rate band.
It is important therefore to understand it is not 10% of the gross estate being left to charity which results in the inheritance tax discount, but 10% of the net estate after these deductions have been made.
The nil-rate band for inheritance tax remains frozen at £325,000 until 6th April 2015, so growth in the value of property and investments will be resulting in larger inheritance tax liabilities between now and then.
The first port of call when considering inheritance tax and estate planning is often a solicitor. We recommend speaking to a solicitor who specialises in estate planning, with membership of the Society of Trust and Estate Practitioners (STEP) a good qualification to look out for.
It is usually worth having a meeting with a Financial Planner before speaking to your solicitor about estate planning.
We often find that we can save our clients a great deal of time (and money) by working with them to establish estate planning objectives within an overall Financial Plan before referring them to a suitable solicitor to implement some or all of the recommended measures.
Do speak to us if the future cost of inheritance tax for you or a parent is a concern or if you have any questions about the announcements made in the Budget yesterday.
Photo credit: Flickr/Mr. T in DC
