INHERITANCE TAX

“Tax, Tax and More Tax”, “The Great Inheritance Tax Rip Off”. These are just two of the recent headlines which highlight the debate over the way more and more people could be affected by the Inheritance Tax trap.

Initially designed to tax only the extremely wealthy with immense fortunes, Inheritance Tax now threatens around 10 million homes or over 40% of households, according to a recent report from Scottish Widows.

The reason for this is simple in that as house prices have risen dramatically in recent years, the rise in the IHT threshold has barely kept pace with inflation.  For the current tax year 2006-2007, it stands at £285,000.  It is estimated that if it had risen in line with house price inflation, it should now be nearer £500,000. 

What this means is that if a person dies with an estate, i.e. property and possessions, worth over £285,000, the estate is liable for IHT at 40% on anything above £285,000. 

So for instance, an estate worth £450,000 would be liable to inheritance tax of £66,000. 

So what can you do to minimise the impact of this tax on your family?  It used to be thought that only the super rich had access to sophisticated tax avoidance schemes but in reality, everyone has the opportunity to seek specialist expert tax advice which goes further than the usual provision of a will from your local solicitor. 

In our area, Sandersons Solicitors have developed a specialist tax planning service over the last twenty years.  Everybody should check that their will and their financial estate planning is fully up to date to take advantage of any opportunities to reduce IHT liability.  With next year’s budget statement shortly to be announced, we should all look closely at our personal finances. 

There are many legal ways of avoiding or minimising IHT, including tax planning through trusts.  Originally, trusts were developed so that a man going off to the Crusades did not forfeit his property and thereby leave his family destitute while he was away. 

Nowadays, there are a wide variety of trusts designed to protect your assets from Inheritance Tax or even from the local council if the surviving partner is taken into care.  Other trusts include Accumulation and Maintenance Trusts, designed to look after young children in the event that you and your partner pass away.  If you have a child who is handicapped, or some other person who you would like to benefit from your will, who you think may not be able to handle their own financial affairs, then you may wish to set up a Discretionary Trust. 

Whatever your circumstances, Inheritance Tax planning is an important yet complex subject which means that you need to consult an expert adviser. 

If you would like further advice, you can contact in the first instance Geraldine Martin (who is a specialist in Inheritance Tax planning) 

Geraldine Martin

Sandersons Solicitors

The Hall, Lairgate,

Beverley HU17 8HL

Tel: 01482 324662

Fax: 01482 860118

Email: enquiries@sandersonssolicitors.co.uk 

Source:  Yorkshire Today, March 2007