This introductory guide to Inheritance Tax (IHT) and estate planning provides a basic understanding of when IHT might be chargeable on an estate and lifetime gifts. It also reviews how any subsequent tax liability may be calculated. Review the IHT guide on our website.
Why is estate planning a financial priority?
One of our clients’ main financial priorities is to be able to pass on accumulated wealth to the next generation. However, with the rise in property prices and investment values, more families find themselves with estates which are potentially liable to inheritance tax.
The pension freedom & choice reform has also increased the flexibility of pensions which has enabled pension planning to be used as part of inheritance tax planning.
What is inheritance tax?
Inheritance Tax is a tax that may be payable on your ‘estate’ when you die. It can also apply to certain gifts made during your lifetime. In general, IHT will be due if the value of your estate on death is greater than your ‘nil rate band’.
How our financial advisers assist you with estate planning
One of our main roles as independent financial advisers is to assist clients with their estate planning and encourage clients to consider financial planning on a family-wide basis.
How we work with solicitors and accountants on estate planning
We work closely with clients and if necessary, their other professional advisers such as solicitors and accountants to ensure financial, legal and tax planning is all joined up.
In estate planning the financial and legal needs of clients are often closely linked. Regulatory changes concerning the nil-rate band often require clients to take advice from several professional advisers. Financial advisers find that inheritance tax often requires specialist advice from solicitors’ in arranging wills, lasting power of attorney (LPA) and trust planning.
How cashflow planning helps with inheritance tax planning
We offer a holistic financial advice and cashflow planning service. We provide clients with a Lifetime Financial Plan that is regularly reviewed and forms the basis of our financial advice. Lifetime financial planning shows clients how different choices affect their inheritance tax. It is not a product or an investment solution in itself but a fundamental part of financial planning to help clients achieve their financial priorities at any stage of life.
Cashflow planning enables clients to visualise how their assets, current and future income and expenditure, life events and other decisions impact their future. We review your personal assets – your home, investments, savings and other possessions to check if you will be liable to pay inheritance tax, we then offer you a tax efficient solution through effective estate planning.
As cashflow analysis is tailored to a client’s life any meetings are centred on their needs and the process encourages them to think about their spending in a different way allowing us to have a much more detailed and thorough discussion about their financial priorities
Estate Planning Checklist – key issues for inheritance tax planning
- Have you written a will?
- Do you have healthcare proxies and power of attorneys in place?
- Who are your estate beneficiaries?
- Have you valued your financial assets?
- Would you consider giving gift allowances in your lifetime?
- Do you have surplus income?
- Could you afford to give up access to some of your capital?
- Do you require a whole of life insurance policy?
‘We recommend all our clients set up a will and put in place healthcare proxies and lasting power of attorney. For more information on how to set these up contact your financial adviser or read Allan Ross, independent financial adviser, Ware – Why set up a will and lasting power of attorney. When we meet clients, we recommend both partners attend our financial reviews, this is especially important when we discuss inheritance tax. For IHT planning clients often want to involve their children too. Many clients have taken our advice and spoken to their children about their financial planning priorities which has assisted them when they come to consider their estate planning. The Lifetime Financial planning tool we use gives clients peace of mind that they have enough income to live off and savings to pay for any one-off items and long-term care if necessary. Seeing the visual cashflow planning modelling gives clients the confidence to start thinking about estate planning. We recently produced a financial passport that is available to all Lonsdale clients. It allows our clients to detail where their financial information and personal details can be found. The financial passport assists with estate planning as it helps family and friends know where your savings, investments and other assets are kept if anything happens to you.’
‘The Financial Conduct Authority does not regulate estate planning, tax advice, wills, trusts or Cashflow Modelling.’