Inheritance Tax Planning
The ‘nil rate band’ for inheritance tax is now £325,000 and as this nil rate band is now transferable between husband and wife, many couples are able to leave up to £650,000 to their children free of any inheritance tax charge. However, at a flat rate of 40% on the excess above the nil rate band, many clients still face significant tax liabilities on death.
There are thankfully many strategies that can be employed to reduce the impact of inheritance tax, including the following, and FK Financial Limited has extensive experience in providing holistic solutions in what is often a complicated area:
- Flexible Trust arrangements where capital is placed into a trust, but the client retains the right to receive regular payments back from the trust. If these are not required they can be kept within the trust and become available again at a later stage. This type of scheme is very flexible if circumstances change in the future, and it is possible for example that the trust could be wound up with all the funds paid back to the client if the estate was no longer liable to inheritance tax
- Discounted Gift Trust arrangements, where clients put money into a trust and receive a fixed income throughout life, with the residual capital available for their children after death
- Loan trust arrangements where capital remains accessible to the client
- Enterprise Investment Scheme (EIS) where assets qualify for business property relief from inheritance tax if held for a minimum of two years at the date of death
- Life assurance schemes which can either provide a low cost safety net provision for inheritance tax for younger clients, or indeed a long term solution where appropriate
- Lifetime gifts and gifts out of normal expenditure
- Deeds of variation where someone has died in the last two years, sometimes including the establishment of a discretionary trust
- Structuring death benefit payments from pension plans and life assurance policies so that the benefits are paid into discretionary trusts, providing benefits for dependants without increasing their estates for inheritance tax purposes