Estate Planning
One of the most controversial areas of modern financial planning is the exposure of a clients estate to inheritance tax. The Government applies stringent taxes to your estate after you have died and therefore it becomes essential for an increasingly large section of the population to take professional financial advise to ensure that your possessions and belongings are distributed in accordance with your wishes after your death. The recent increase in house prices and the Governments failure to raise the minimum threshold at a rate faster than inflation means that more and more people will be effected by inheritance tax. It is no longer something that only the very wealthy need to consider and inheritance tax receipts have risen dramatically over the past few years. Considering that the lower threshold limit, known at the Nil Rate Band, stands at £263,000.00 in the tax year 2004/05. If the value of your estate, all your possessions including your house exceed this, then on death your heirs may have to pay a tax at a flat rate of 40% on the excess and it is clear that many people who will currently fall into the inheritance tax trap are not aware of it.
There are a number of steps that can be taken to help mitigate this situation as estate planning becomes more and more an intrical part of the clients overall financial plan. It is clear that every clients individual circumstance will differ but if is imperative to instigate early an appropriate strategy. It is too late to make an effective inheritance tax planning once a client has died. It is interesting to note that the Inland Revenue usually require any tax to be paid before an estate is distributed which could mean that your beneficiaries need to take out expensive loans in order to pay the bill they receive for an inheritance.
Inheritance tax planning is a complicated area with a plethora of exemptions and reliefs, Nil Rate Band exemptions, annual capital exemptions, normal expenditure exemptions, small gift exemptions, married gift exemptions, transfer between spouse exemptions, potentially exempt transfers, relief on business assets on agricultural land and woodland, each having a particular bearing on a clients estate. We believe it imperitive therefore that appropriate professional advice is taken and Adams Russell Ltd have a wealth of experience in dealing with the complexities associated with this area.