Potential implications of such gifts with regard to Inheritance Tax
Some people like to transfer some of their assets whilst they are alive – these are known as ‘lifetime transfers’. Whilst we are all free to do this whenever we want, it is important to be aware of the potential implications of such gifts with regard to Inheritance Tax. The two main types are potentially exempt transfers (PETs) and chargeable lifetime transfers (CLTs).
Failure to take action could compromise the long-term financial security of the family
If a person wants to be sure their wishes will be met after they die, then it’s important to have a Will. A Will is the only way to make sure savings and possessions forming an estate go to the people and causes that the person cares about. Unmarried partners, including same-sex couples who don’t have a registered civil partnership, have no right to inherit if there is no Will. One of the main reasons also for drawing up a Will is to mitigate a potential Inheritance Tax liability.
‘Ring-fencing’ assets to minimise or mitigate Inheritance Tax
Appropriate trusts can be used for minimising or mitigating Inheritance Tax estate taxes and can offer other benefits as part of an integrated and coordinated approach to managing wealth. A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Once the trust has been created, a person can use it to ‘ring-fence’ assets.
Taking control of decisions even in the event you can’t make them yourself
A lasting power of attorney (LPA) enables individuals to take control of decisions that affect them, even in the event that they can’t make those decisions for themselves. Without them, loved ones could be forced to endure a costly and lengthy process to obtain authority to act for an individual who has lost mental capacity.
Planning steps to consider when passing wealth in the most tax-efficient way
Whether you have earned your wealth, inherited it or made shrewd investments, you will want to ensure that as little of it as possible ends up in the hands of HM Revenue & Customs. With careful planning and professional financial advice, it is possible to take preventative action to either reduce or mitigate a persons beneficiaries’ Inheritance Tax (IHT) bill – or mitigate it altogether. These are some of the main areas to consider.