Estate Planning, Inheritance Tax and the Family Home
More and more people are falling into the inheritance tax net when their homes are passed to the next generation. Increases in tax allowances are consistently falling behind increasing house prices.
We have included some pointers below on how to maximise your estate planning to ensure that those who do inherit your property benefit from that bequest as fully as is possible.
Making a Will
Make sure that you reduce your Inheritance tax liabilities by using all your available allowances, exemptions and reliefs — nil rate band allowance, business property relief, agricultural property relief and spouse exemptions. It is worth reviewing your will from time to time to ensure that it is still effective and has not been affected by recent changes in tax legislation.
Trusts can still be used to minimise your IHT liabilities (despite the recent assault on certain trust arrangements), for instance, Discretionary Trusts still provide a useful vehicle for sheltering assets from inheritance tax. However for legal and tax reasons care must be taken in the drafting of these and we would strongly suggest that you contact us before considering their use.
Leaving a share in your family home to your children
Can be useful as long as you realise that children must live in the property to be exempt from the effects of capital gains tax - should the property be sold. Also their share of the house will be included in their own estate, with the potential to increase their own inheritance tax liability. Your children’s personal circumstances should also be taken into account (they may themselves become bankrupt or divorced!)
This can be a complex area that deserves frequent review to maximise the effects of changing legislation. If we have not advised on estate planning for some time please call to discuss and make an appointment.