IHT and Trusts
Living in Surrey and Hampshire certainly has its benefits but not when it comes to Inheritance Tax liability.
What is Inheritance Tax?
- Inheritance Tax (IHT) has existed in one form or another since 1796 and was implemented to redistribute wealth from the aristocracy to the government for the benefit of the people)
- IHT is charged at 40% on all of a persons worldwide Assets over £312,000 (The Nil Rate Band)
- The Nil Rate Band is set to rise to £350,000 by 2010, however this does not come close to growth in property inflation during the last decade
- Inheritance Tax accounts for about 0.8% of government income and currently affects 1 in 6 people’s estates
- More and more people are being caught above the nil rate band threshold with IHT raising the Treasury around £2 billion in 2001 and £3.6 billion in 2006
- Over £1 billion a year is paid in inheritance tax which could be avoided.
So for example
Mr. Smith has assets of £1,000,000 (after deduction of his liabilities) at his death.
The Amount of IHT to pay is calculated as follows:
Nil Rate Band: (£312,000)
Chargeable Estate: £688,000
IHT @ 40%= £275,200
For detailed information on IHT visit HMRC's IHT Site
Restructuring your estate and how assets are held can significantly reduce your potential tax liability.
WHAT ARE TRUSTS?
Trusts are used to minimise the tax liability of a person’s estate and to preserve capital.
A trust is simply a legal arrangement under which ‘Trustees’ hold assets for the benefit of one or more ‘Beneficiaries’
There are a number of benefits of using trusts:
- To provide for your wife or husband after your death while protecting the interests of your children
- To use inheritance exemptions when you die
- To dispose of a business in a tax efficient way
- To protect the inheritance of young children
- To give away assets during your life but retaining control of them
- Income tax savings can be made
Very often the sooner a trust is set up and a gift made the greater the chance of securing the most favourable trust treatment.
HOW CAN SETFORDS HELP YOU?
Setfords Solicitors Estate Planning can help minimize the Estates liability to IHT in a friendly and cost effective way.
We understand that everybody's objectives are different and we advise on a case by case basis after gaining an understanding of your particular circumstances.
The following are just some of the ways in which we can help you to minimise your estates liability to IHT
- The effect of the transferable ‘nil rate band’ for married couples
- Shifting the ownership of assets between spouses so as to minimise your wealth on your death
- Lifetime giving to children and relatives
- The various allowances allowed to individuals during their life and on their death
- Charitable giving that can reduce the value of the Estate below the IHT threshold
- Putting assets into trust so that they are not part of your estate on your death
If you would like to discuss your requirements in more detail please contact Delfin Posada on 01306 884432.