Newsletter Summer 2016

Inheritance Tax (IHT) planning for untimely death

In early 2016, almost every week brought news of the death of another well-known star of stage, screen or music. This is partly because the babyboomer generation, born in the years 1945 to 1960, are now reaching the end of their lives.

It also serves as a reminder that we each have a finite time on this earth, and without some careful planning, your relatives can be left with a nasty IHT bill to pay on your estate.

One way to reduce IHT is to make gifts of capital while alive, as David Cameron’s mother made to him. The IHT is only avoided if the donor survives for seven years after the date of the gift, but it’s worth thinking about if one person has been left with more capital than they can reasonably spend.

Many older people are afraid of giving away money that may be needed to fund care in their last years. This is understandable, but we can help with this calculation by working through cash-flow forecasts using various estimates of future expenses and life expectancies.

There is a new IHT exemption for the family home which will apply to deaths on or after 6 April 2017. The property must pass on death to a direct descendent of the owner for the exemption to apply, so the donor’s Will must be clear about who is to receive specific properties in their estate. Step children and adopted children are treated as direct descendants for this purpose, but nieces and nephews are not.

Let’s have that conversation about planning for tax due after a death before it’s too late.