Death is obviously a difficult topic of conversation. Few of us want to contemplate it for ourselves or for others, but it is of course inevitable. The only thing we don’t know is when!
The earlier we plan for the financial impact of death, the less pain and confusion for the survivors and the less future generations potentially lose to HMRC. Planning will allow your family to enjoy your lifetime’s achievement whilst taking into account current and anticipated future needs.
The starting point is to assess your wealth (See Wealth reports) and understand the likely impact of IHT if you were to die without planning. That review will also look ahead at how your wealth is likely to grow as you save, pay off debt, inherit from others, or just see property or other values grow. You may not have a big problem today, but it might be a big one in 5 or 10 years’ time.
IHT is one of the easiest taxes to avoid. There are many tax reliefs available from annual allowances and charitable and personal gifts, amounts gifted on marriage or from surplus income and Agricultural Property Relief (APR), Business Property Relief (BPR) and various other complex options to mitigate the worst case of a 40% tax charge on some of your estate.
Whether you give more away and live the 7 years needed to avoid IHT, or take out an insurance policy to cover the tax that would arise, there are many options available once you know the scale of the problem. All of the planning work must then be carefully implemented, Wills updated, new shareholders’ agreements and many other important steps.
The worst case for many is that beneficiaries are forced to sell family homes or other assets just to pay the IHT on the estate. Early planning gives options and the best opportunity to ensure your intentions and wishes happen.