Everything we do we believe will challenge people's expectations regarding financial planning. We believe financial planning has the power to improve quality of life.

Looking at the bigger picture

The difference between legally making use of your tax allowances and planning for the future in a timely manner, or not, can be absolutely huge. In our experience a lack of understanding of tax legislation often leads to people paying too much tax both in their lifetimes and upon death. We specialise in providing tax mitigation solutions to private clients to help them and their families pay less tax.

Tax and Estate Planning – how to get it right.

Estate Planning is one of the most important things you can do as you approach later life. Here we’ll help you by explaining the two critical areas of:
• Inheritance tax
• Estate planning

A bit of background

For many approaching later life, concern over the impact inheritance tax may have on their relatives is a very real and important issue.

Estate planning provides a common, sound and perfectly legal way to prepare your finances and estate to ensure that your assets are protected and your tax liability upon death is mitigated for your loved ones once you’re gone.

What is inheritance tax?

Inheritance tax is the tax your executors pay upon your estate to the government upon your death. At present the UK threshold is £325,000 per person – that is to say, if at the time of your passing you have an estate worth more than £325,000 –including property, certain belongings and savings, then your relatives will be paying inheritance tax on your estate before they can inherit it (often referred to as probate being granted).

Inheritance tax rate – The current rate of inheritance tax stands at 40%. There are some concessions available – but it’s important not to count on those as they are often dependent on your situation, which is subject to change.

Plan for the future – Inheritance tax rates and rules may also change over time. More and more people are looking to protect their assets against the impact of inheritance tax, enabling them to ensure that they can leave more to loved ones when they pass away.

If your assets amount to, or even are projected to be in excess of £325,000, and you are concerned about how to protect property and finances such as savings and investments then speak to a financial planner with a specialism in estate planning as soon as possible.

What is estate planning – and why is it important?

Estate planning enables you to put together a clear plan that details your wishes regarding how you’d like your estate to be managed both in your lifetime and upon your death.

This will prove to be incredibly helpful for you loved ones, who can then arrange your affairs accordingly. It also helps you to protect your family and any other beneficiaries from the impact of inheritance tax.

When provisions aren’t made in advance, inheritance tax can come as a nasty shock for family members. Fortunately however there are ways to protect your assets – provided you prepare in advance there are many options available to you.

Why is estate planning important?

First and foremost, making a plan can offer you and your family peace of mind. The earlier you can start and make provisions for the future the better.

It’s never nice to think about death and how you will arrange your affairs after you’re gone – but it’s crucial if you want to protect your assets from inheritance tax.

How to avoid inheritance tax?

Estate planning is one of the best ways to avoid paying too much inheritance tax.

It could even help you to avoid paying it altogether. This is because when you are able to review all your assets early on and outline your wishes you can portion and divide them intelligently based on legislation and current rates of taxation. There are several key ways you can avoid paying inheritance tax:

1. Make gifts to family members and friends

Gifts are one of the best and most efficient ways to avoid inheritance tax.
If you can afford to do so, distributing money early on (ideally 7 years before your death) rather than waiting and leaving sums in your will is incredibly tax-efficient. This is because the overall amount of assets you leave behind (over £325,000) will be subject to inheritance tax at a rate currently set at 40%.
You are permitted to give immediately exempt gifts of up to £3,000 a year to a single person – so with forward planning you could give away a significant amount without having to pay tax. If you choose to give away more than £3,000 per year the additional amount will potentially subject to taxation on your death (should death occur within 7 years of the gift).

There are some types of gifts that are exempt from taxation altogether. These include gifts between spouses or civil partners, gifts to universities or charities (subject to qualification) and any gifts given over seven years before your death. Before making a gift, it is best to take advice to be sure you’re reducing your liability appropriately.

2. Set up a trust fund

Traditionally trust funds are set up to ring-fence assets for the ultimate benefit of beneficiaries.
Trusts are also a fantastic way to reduce or avoid inheritance tax payments altogether. Trust funds may offer protection from inheritance tax and can be set up at any time.
Trusts can be set up to provide advance payments, drip-fed to family members to allow them to receive inheritance early. But trust funds also have benefits for those with life insurance policies, helping to potentially reduce the amount of inheritance tax that families pay and often speeding up the pace at which beneficiaries can receive their payout.

Without trust funds in place your life insurance payout is added to your estate and taxed. When your life insurance is set up in trust it may not be included in any inheritance tax calculation.

Is specific estate planning advice based on my situation important?

You may need tailored estate planning advice depending on the complexity of your situation.

In most cases it is straightforward – but understanding the different options available to you and deciding which ones to choose can be a daunting and difficult task. Having a professional independent advisor on board can be incredibly useful for this reason.

They will conduct a thorough review of your assets and situation, taking into account any investments, property, pensions, businesses, life insurance and savings you have and what ultimate goal you wish to achieve.

This enables them to acquire an accurate picture of your financial status and determine the impact inheritance tax may have on your estate. They’ll also take into account your future needs and personal preferences.

An independent financial advisor will then work with you to discover the most effective way to protect your assets in order for you to pass them on to those you love.

It is likely that they will put together a bespoke estate planning strategy that may include trust funds, investments and insurance policies to cover your assets.

Don’t forget that as legislation does change you will need to arrange regular reviews with your financial advisor to ensure that your plans are still up to date and can still deliver for you when needed.

Start planning your future. Speak to us today.

Contact Us

Seventy Financial Planning
The Apple Store, Haggs Farm,
Haggs Road, Follifoot, Harrogate,

01423 611004

[email protected]

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