Secure Your Legacy with Tax-Efficient Planning

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What Is Inheritance Tax (IHT)?

It’s a tax which could be levied on death dependent on the size of a persons estate (their total net worth on death). It applies on the death of divorced or single individual or the second death of a couple who are married / in a civil partnership.

Inheritance Tax planning or sometimes called, “intergenerational planning”, looks at ways in which the tax levied can be eliminated, reduced or provisions made to pay for the liability on death.

How Does It Work?

The below is correct as at time of writing - 24/09/2024

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When considering intergenerational planning, it’s important to understand the allowances available based on your personal circumstances. Each individual has a "nil rate band" (NRB) for inheritance tax (IHT) purposes of £325,000. Transfers between spouses or civil partners on death are fully exempt from IHT, meaning the NRB doesn’t apply in this case, but it becomes relevant upon the death of the surviving spouse. Spouses and civil partners can inherit their late partner’s allowance, resulting in a combined NRB of £650,000 upon the second death.

For couples who hold a residential property, an additional allowance of £175,000, known as the "residence nil rate band" (RNRB), can be claimed, provided the property is left to direct descendants on death. This brings the total maximum allowance between a couple to £1,000,000. However, if the estate exceeds £2,000,000, the RNRB is tapered away by £1 for every £2 over this threshold. This means that estates above this value see a gradual reduction in the benefit of the RNRB.

In addition to the NRB and RNRB, there are other allowances available, such as the £3,000 annual gift allowance, which can be carried forward by one year. If no gift is made in a given year, you can make a £6,000 gift in the following year, exempt from IHT. Couples have a combined gift allowance of £6,000 annually, and you can make multiple gifts of £250 to different individuals. There are also wedding gift allowances of £5,000 for children, £2,500 for grandchildren, and £1,000 for others. Gifts beyond these limits are subject to the 7-year rule, and taper relief applies for gifts made between 3 and 7 years before death.

A voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue

Former Labour Chancellor Roy Jenkins

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How Can We Help?

Like all the other areas of financial planning, it’s important to view IHT planning holistically, and careful consideration needs to be given by a suitably qualified adviser.

The first course of action is to establish the total value of your estate and ascertain if an Inheritance Tax liability exists. Assuming it does, we will then go onto discuss ways in which you can reduce your liability or make provisions to pay the liability when it becomes due, including:

  • Consider cost effective measures to reduce IHT (trusts for life insurance plans)

  • Discuss allowances available

  • Consider trust based investments or gifts

  • Discuss other investments which could attract IHT relief

  • Look at the option of a life insurance plan to pay the liability

Why Blackstone Wealth?

At Blackstone Wealth, we believe in truly independent financial advice. With access to solutions from across the entire market, we’re not tied to any provider, ensuring our recommendations are always tailored to your unique needs

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