Inheritance tax is one of the most disliked taxes that you can pay during lifetime or upon death. In the South East of England more families are falling into the taxable bracket upon death because of high property prices. Assets purchased many years ago which have been subject to fantastic growth may also be caught for capital gains tax charges if they are disposed of before death. Steps can be taken to mitigate these taxes and wills are one way of planning for tax purposes.
Each individual is allowed £325,000 of assets before they are subject to potential inheritance tax charges. This figure can be increased to £500,000 if you leave your home to your blood line relatives, but there are conditions to achieve this additional £175,000 tax bonus.
If you are part of a couple both your £325,000 and £175,00 allowances can be transferred if they are not used on the first death so, in theory, couples can have assets up to £1million before they have to consider Inheritance Tax planning but as soon as your assets reach £2million tax allowances begin to decrease again.
If assets heavy with gain are retained in an estate rather than sold the gain is wiped out on death so sometimes it is worth keeping things rather than selling.
Tax planning is not always governed by the amount of tax that may be paid. If you own a farm, or a business there may be a need for you to receive planning advice as part of your will preparation to prevent the split of family businesses upon death. Taxes and reliefs could mean that your thoughts on what you want to do with assets are significantly altered once you are aware of the consequences.
Wills prepared in conjunction with tax planning require details of your assets and liabilities, how assets are owned and used, who owns them with you and what benefit you receive from them. It is often necessary to speak to your accountants and independent financial advisers to work together to achieve the best outcome for you.
If you think you require tax planning advice at the same time as writing your will please give us a shout.
For more details on our charges in relation to making wills please click here