Estate Planning: What Do You Need to Consider?

Whether you have had a successful career that has allowed you to accumulate wealth, or you have become the benefactor of inheritances, the maximum joint estate that you can pass on without incurring inheritance tax (IHT) is £1m, provided you are passing your home to a direct descendent.

In this blog post, we’re going to look at the impact that inheritance tax can have on your estate and what planning you can do to try and reduce this.

If you have never been married, do not own a home or have children, then the total estate before you pay tax is lower, so seeking professional advice is crucial to understanding your IHT liability.

According to a study by HMRC, which was updated on 29 July 2021, for taxable estates in the UK of over £1m, these made up 81% of the tax liability generated in the 2020/21 tax year and the majority of those estates consisted of UK residential property and cash. This shows that rising house prices, and the continued preference to hold investment properties pushing estates beyond the help of the Residence Nil Rate Band have significantly helped the Inheritance tax receipts by the UK Government of £5.4bn in 2020/21.

Financial Forecast and Analysis

The obvious choices are to pass some of this wealth on to future generations before you die or accept the IHT bill and provide funds outside of your estate to pay the tax bill; but how do you know what you can afford to give away and still meet all your current and future costs?

At Francis Clark Financial Planning, we can help you answer this important question and help you prioritise what is important to you by creating a financial forecast and analysis report. We can also consider the impacts of needing long term care, dying early or living longer and downsizing your home in the future.

Estate Planning

Once you have an idea of what you can afford to give away, we can look at the most tax-efficient and suitable ways for you to do this, looking at your pensions and investments to reduce or remove your inheritance tax bill.

Will and Lasting Power of Attorney

The foundation of planning is having an up to date will which expresses your wishes and appoints a guardian for dependents. It is also a great time to set up a lasting power of attorney so that if you are unable to make financial or health decisions for yourself, you can decide upon someone who can step into your shoes whether temporarily or over a longer-term.

Did you know ….

Without a valid Will, your estate will be distributed in accordance with set rules prescribed in local law and the courts will decide who deals with the distribution of the estate.

If a married couple has separate bank accounts, the bank would not allow them to access each other’s accounts without a lasting power of attorney for property and financial affairs.

Estate Planning Solutions

We have experts who can provide estate planning strategies. Depending on the assets you hold, this may be a combined approach for your financial planner and our tax adviser colleagues in Francis Clark LLP.

We can consider a wide range of options to reduce your IHT bill, such as:

● A lump sum or regular gifting options using the various exemptions from IHT available
● Loans
● Creating trusts to allow control and protection of investments that are gifted
● Reorganisation of investments and income strategies to focus on reducing investments that remain in the estate and retaining or building those investments that will not attract IHT on death
● Recommending investments with IHT advantages
● Setting up life cover in trust to provide a lump sum to pay any remaining tax bill

Get In Contact

If you would like help to understand your IHT liability or would like help to reduce this get in touch with one of our financial planners today: https://fcfp.co.uk/contact/