Changes to Inheritance Tax (IHT) - What you need to know
Throughout my working life in the Private Client Sector, I have noticed so many instances where people have been advised one way or another to include a trust in their will and/or set up a trust fund either to mitigate Inheritance Tax or potential future fees. Whilst this can sometimes be beneficial, it depends on the individuals and their assets and more often than not putting your estate into trust can make things worse.
Every individual has a £325k IHT threshold which can be combined with their spouse or surviving partner if their estates passed between each other first. That means £650k can be passed down IHT free and with Property involved that figure can rise to £1m. However, assets that have been put into trust or registered in a trust can fall outside these thresholds or remove the availability of these thresholds entirely leaving tax to pay on the estate.
Assets in trust can also create issues for the trustees and beneficiaries, making the estate administration and future property sales/transfers more complicated than they need to be. There are also further Inheritance Tax charges on certain trusts which can eat away at someone’s potential inheritance.
Trust corporations can sometimes put their own management charges on these trusts and may charge fees to renounce as trustees, as executors or even speak with the beneficiaries, which people might not fully be aware of when they agree to sign up.
In modern times the thresholds for Inheritance Tax cover most estates within the £1m range and where an estate goes above that threshold, it can be managed with an efficiently structured Will and careful estate planning.
Estate planning doesn’t just deal with Inheritance Tax, but it can also help setup plans for vulnerable or disabled beneficiaries and provide future proof planning for families with a range of complex situations and relationships.
All of this can be looked into by us simply making a basic assessment of your assets, comparing it to the thresholds and what you want to achieve. Then we can look at the next steps and what action we can take to ensure the best possible outcome for all involved.
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The wills and probate team at Holden Smith Law are ready to help you prepare your estate. Contact us today for a free consultation and a no-nonsense approach to Estate Planning.
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