Inheritance tax

Anyone with their own home in central London is most likely to have assets with a value higher than the threshold for inheritance tax which is currently £325,000. Amounts over the threshold passing to non-exempt beneficiaries such as children, grandchildren and friends are liable for inheritance tax at a whopping 40%!

Though there are frequent calls for the threshold to be raised, for the rate of tax to be reduced and for inheritance tax to be abolished, there seems little prospect of any of these happening in the near future. Most recently, the Conservative Party's manifesto commitment to raise the threshold to £1m was dropped as part of its coalition agreement with the Liberal Democrats. This could change if the coalition unravels or if the economy recovers faster than expected, but, in the meantime, there are unlikely to be significant changes to inheritance tax in the current climate of national financial austerity.

The only option for now is to find ways of reducing your inheritance tax liability. This is best done before your death but it can also be done afterwards.

Minimising inheritance tax: before death

This can be done through your will, by making allowable gifts and by planning the way your estate is distributed. It is possible to reduce the potential inheritance tax bill further through lifetime gifts. These are complex issues which require you to consider all the options and their implications. We advise you to take legal advice on what is best for you so you can be sure you have explored all the options.

What you should do

Make a list of your assets and their values (properties, shares, savings, investments, life assurance policies, endowment policies, pensions which pay lump sums on death, premium bonds, car, cash and anything else of value that will be counted as part of your estate).

Make a list of your liabilities and their values (mortgages, loans and debts).

This, with other information we will ask you about, will enable us to calculate your likely inheritance tax liability and advise you on the best way to minimise it.

Minimising inheritance tax: after death

Although we would never advise anyone not to worry about their inheritance tax liability before they die, under current tax laws there are ways of reducing an estate's liability after someone has died.

In many cases it is possible for a deed of variation to be drawn up changing the will to make it more tax efficient. This must be done within two years of the death.

If you are an executor or beneficiary to a will which you believe could be restructured to reduce the inheritance tax due, please contact us.

 

 

 

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