Take control of your assets and tax liability

Inheritance tax (IHT) can have huge implications for individuals and their families, making it an essential part of financial and estate planning, particularly for clients later in life.

HM Revenue & Customs can claim 40% tax on the estate above the current IHT threshold, which is £325,000 (also known as the nil rate band).

Many of my clients’ estates do have a value above the nil rate band, mainly due to the sustained high level of house prices in London and the South East. You do not have to be “wealthy” to leave your loved ones with a significant liability to pay IHT.  In some cases this means that they have to sell the family home or raise a mortgage to keep it.

Making a Will therefore is important and especially so where there is a taxable estate, i.e. over the current threshold limit of £325,000.

The Finance Act 2008 enabled the unused nil rate band of the first of the spouses (or civil partners) to die, being transferred over to the executors of the survivor, currently giving a tax free estate of £650,000 (£325,000 x 2). This is a most useful relief and should be the starting point of any tax planning.

When advising clients on mitigating tax, I am frequently asked whether a person can give their home away, survive 7 years and bring their estate below the IHT threshold. This of course can be done, but the gift is ineffective from an IHT point of view if there is a “reservation of benefit” by the donor. Also, any property disposed of during one’s lifetime, whether by sale or by gift may be subject to Capital Gains Tax (CGT).  The beneficiaries of the gift may also incur CGT problems of their own when the property is eventually sold.

There are many potential pitfalls and of course thinking about making Will or IHT planning inevitably requires acknowledging your own mortality and what will happen afterwards.  However, making a Will and considering the possibility of legitimate tax mitigation leaves people in control of their assets and undoubtedly gives them peace of mind.

Grant Saw Solicitors provide a comprehensive service for wills and tax planning from our Greenwich offices with appointments also available at our new Blackheath office at 9 Hare & Billet Road, Blackheath, London SE3 0RB.

In addition, for clients requiring investment advice we are pleased to make a referral to our sister company Grant Saw Wealth Management Limited, Certified Financial Planners based at 2 Charlton Road, Blackheath, London SE3 7EX who are fully independent FSA-regulated financial advisers.

I welcome enquiries from new clients. You can contact me by telephoning 020 8858 6971, or by e-mail kp@grantsaw.co.uk

This is not legal advice; it is intended to provide information of general interest about current legal issues.