LIFETIME PLANNING TO AVOID DEATH DUTIES

There are two certainties in life – death and taxes. With house prices continuing to rise, more people than ever are finding that their assets are now reaching the 2002/03 threshold of £250,000 where they will be liable for Inheritance Tax. Peter Jones from independent chartered accountancy firm, Broomfield & Alexander’s financial planning division is a member of the Society of Trusts and Estates Practitioners. He advises that careful planning should allow you to keep more of your wealth in your family, rather than having to pay tax on it.

“Planning to minimise the liability to Inheritance Tax is a team effort involving you and your financial adviser. In order for long-term objectives to be set, you need to make decisions about your finances and your family, and you need to start doing it now.”

Inheritance tax is currently payable where a person’s wealth is in excess of £250,000. If you own your own house and have some savings, life assurance policies, or business assets, your estate could be liable. However, in the main, gifts made during your lifetime will be entirely exempt from Inheritance Tax if you live for seven years after making the gift.

When you die, Inheritance Tax will be charged on your personal wealth, and gifts made in the preceding seven year must be considered. The full rate of tax you are liable to pay is 40 per cent, but this is reduced on a sliding scale for tax due on gifts made between three and seven years before your death.

But before you start giving away to friends and family, there are a few things that you need to consider. You must think about the value of your assets now, and how this may change as time goes by; your own financial security and your family’s future needs.

You need to make sure that you and your spouse are properly provided for, particularly in retirement or if you were to die first. It would not make sense to give assets to your children only to find that in later life you need to ask for some or all of them back.

Inheritance tax does not normally affect businesses, as most trading businesses, but not investment businesses, that you are involved with will attract business property relief of 100 per cent. In other words, your business can be passed on with no Inheritance Tax being paid. Assets owned by you but used by a partnership in which you are a partner, or a company you control, attract business property relief of 50 per cent. There are other reliefs which apply to agricultural property.

You may decide that the only thing that you want to leave to your heirs is fond memories and leave all your assets to your favourite charity. There is no Inheritance Tax on assets gifted to charities.

Peter Jones concluded: “Inheritance tax is no longer limited to the very wealthy – it is something that most of us need to be planning for and the sooner you enlist the help of professional advisers the better. Your professional adviser will be able to review all your assets and ensure you minimise your inheritance tax burden”

For further information about inheritance tax or any of the other specialist services that Broomfield & Alexander has to offer please telephone 0800 052 1387 or email infoline@broomfield.co.uk

Established in 1912, Broomfield & Alexander is one of the largest independent chartered accountancy firms in Wales with more than 80 employees working from offices across South East Wales. It offers an extensive range of business advice and financial planning tips online. Just visit www.broomfield.co.uk and click on Business Forum.