Will the Taxman be the Major Beneficiary of Your Will?

In this guest post, Riverfall Financial takes a look at inheritance tax and offers advice and food for thought in protecting your wealth for future generations.

Inheritance Tax is a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue.”

This famous quote from the late Roy Jenkins MP is now beginning to show its age, but the kernel of truth hidden within the rather cynical humour is still valid.

Recent figures from HMRC show that Inheritance Tax income surged by more than 20% in the first four months of the tax year with almost £2bn being taken from people’s estates between April and July 2017, meaning that the total has gone up faster this tax year than in any other since 2010.

Make smart choices with your money to live the life you want

Rising property values and a more aggressive approach from HMRC, together with people not making adequate plans for passing their estate to the next generation, are the principal reasons for this increase.

For those of us who would like to choose who will benefit from the wealth we have created during our lifetime, rather than leave our heirs to settle a tax bill calculated at 40% of our estate’s value (after deductions for allowances), the good news is that there are actions you can take.

What should I do?

Step 1:

Your first step should be to search online for one of the many Inheritance Tax calculators which will give you an approximate idea of the potential liability you may be leaving behind.

If this quick calculation shows a potentially significant tax liability, then the good news is that there are probably a number of things you can do to reduce that amount.

Step 2:

You should speak to a Financial Adviser who will explain to you the range of options available to protect your wealth for future generations, which may include:

  • Write or update your will, by a solicitor
  • Give cash gifts to family members and use exemptions
  • Own assets which are not liable to inheritance tax
  • Write your life assurance policies into trust
  • Put gifts into a trust for beneficiaries
  • Will gifts to charities
  • Equity release plans

Final Thoughts

Despite Mr Jenkins’ assertion that Inheritance Tax is a voluntary tax, it is unlikely that there will be a single magical solution that will eliminate all of your Inheritance Tax liability. It is more probable that your Financial Adviser will lead you through several well-planned steps to reduce the amount your estate will need to pay. If you are still concerned by the remaining liability, then you can take out a life assurance policy written in trust to cover that amount on your death.

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

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