Planning your Family's Wealth

Writing a will is often one of those things that everyone says they will get around to doing, but often never becomes a top priority.

However, keeping an up to date will could be incredibly valuable to your surviving family. When it is drawn up properly, it will not only ensure that your family will receive the assets that you wish for them to receive but can also help to minimise any Inheritance Tax that the government may try to claw from your estate. 

If it does, then excellent, you are clearly on top of your financial wealth planning, although unfortunately you are also in the minority as most people either do not have a will or do not have a will which is up to date.

If you do not have a will and the worst was to happen then you could find that your assets are not passed to those who you would wish to benefit. To die without a will is to die in estate which can mean that a large proportion of your estate is passed to the government. Neither should you leave the writing of a will until you are married or have children either, as you could still find that your estate would not pass to the other members of your family as you would have wished.

A will, of course, is not just for the distribution of your wealth, as it is also a very effective tax planning tool, to reduce any Inheritance Tax payable upon your death.

Forward planning is vital when it comes to reducing the Inheritance Tax (IHT) liability. Here’s an overview:

  • Gifts between spouses are free from IHT.
  • There is a basic IHT threshold of £325,000 called the Nil Rate Band.
  • From April 2020, you also have a Residential Nil Rate Band of £175,000.
  • Assets exceeding the combined thresholds will be taxed at 40%
  • Business Property Relief (BPR) is a relief from IHT of 50% or 100% for relevant ‘business property

There are various planning methods that can be utilized if you are in this situation from the making of lifetime gifts (assuming that you would wish to give away some of your wealth prior to your death of course), to the use of a variety of different trust structures which could receive any life or critical illness benefits, and hence hold the funds outside of the clutches of the tax man.

However, it is worth noting that gifts made during your lifetime could become subject to Inheritance Tax should you die within 7 years of making the gift, and so if you are reasonably young and in good health, you may wish to consider putting some money into your children's (or grandchildren's) names sooner rather than later as this can often be the most effective form of avoiding inheritance tax in the long term. Sneakily, if this money is invested well, this could also help to reduce the overall tax payable on your family income as well!

Should you wish to discuss any form of inheritance tax planning, please speak to one of our advisers by calling 01474 853 856 or emailing enquiries@accountantsfortraders.co.uk who will be happy to recommend a will writer and estate planner who will help you plan your will effectively.

 


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