In recent years we have also seen growth in the popularity of investment solutions that use BPR as a means of planning for IHT. Such solutions allow individuals to plan for IHT whilst retaining control and access to their investment and provided that the BPR qualifying investments are held for 2 years prior to death, they enjoy 100 % relief from IHT. Seneca Partners offer a solution in this area via the Seneca IHT Portfolio Service.
What are some of the key issues to consider when planning for the future?
Wealth management is usually first and foremost on people’ s minds when they are planning for later life and looking to safeguard wealth for the next generation.
Advice will need to be taken on the best way to maximise the value of an estate when wealth is being transferred, such as looking at any business assets or dealing with complex financial matters.
What do I need to know about inheritance tax and how can I plan to properly minimise its effects?
With the Government having announced that the standard Inheritance Tax( IHT) nil rate band, available to any individual, will remain at £ 325,000 until at least April 2019 and with the forthcoming additional residence nil rate band due to begin being phased in on April 6 2017, IHT planning is once again back on the agenda.
But don’ t forget that there are other important factors to take into account, from taking advice on a Will or dealing with estate planning. Dying without a Will can leave remaining family members in a difficult situation, with the law determining how an estate is distributed, rather than a person’ s wishes.
Trusts can be a very valuable tool at this stage, too, for example ring-fencing assets for minors or vulnerable beneficiaries.
Technically, next of kin have no legal entitlement to deal with the affairs of a family member – only a legally appointed attorney or court appointed deputy can do so.
The cornerstone of IHT planning is to ensure that a tax efficient Will is in place. Ensuring that a Will is appropriately structured can have a very significant effect on the amount of IHT payable. Thereafter, IHT planning is largely about lifetime giving and IHT-friendly investing.
In terms of giving, there are a number of lifetime exemptions available, and subject to those, a lifetime gift made direct to an individual will be exempt from IHT providing the donor survives for seven years, though the rules are more complex when making gifts into trust.
Another useful strategy is to ensure that any life insurance cover, death in service benefits and pension funds are dealt with in a tax efficient way. The most flexible and IHT efficient way of dealing with life insurance and death in service benefits is to direct any payouts into a discretionary trust for the benefit of the deceased’ s intended beneficiaries.
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