Take action now to protect your family’s future

People’s lives are getting busier and busier and it is all too easy to defer any decisions which will impact on the long term financial health of your family. However, it is well worth taking a little time out to consider how your family would be provided for in the event of your demise.

The first step would be to consider the net value of your assets, the terms of any existing wills and consider whether you have entered into any lifetime planning which may need to be taken into account in the event of your death. In simple terms, if the value of your estate is more than £325,000 (£650,000 in total for married couples and civil partners) then you are likely to have an Inheritance Tax (IHT) liability on death and the next step would be to consider whether any steps should be taken to mitigate this liability.

The second step would be to consider how your will should be structured so that it is not only tax efficient but (even more importantly) reflects your wishes and any beneficiary’s specific circumstances. For example, leaving assets on the terms of a trust can help to protect beneficiaries from their worst excesses (while still ensuring that they can receive an income stream and possibly access to capital at the discretion of the trustees). As you would expect, there are taxation and legal consequences of leaving assets on the terms of a trust and these would need to be explored before a final decision was made.

Depending upon the size of your estate, the nature of your assets and availability of any IHT reliefs, you may then also wish to consider any lifetime IHT planning opportunities. There are a number of options available to individuals and the right solution will vary from person to person depending upon their specific situation. Detailed consideration of the planning opportunities is outside the scope of this article but it goes without saying that your lifetime needs are of paramount importance and lifetime gifts should not be made if they prejudice your financial position and security for the future.

It is also worth mentioning that thought should be given to whether any IHT lifetime planning could crystallise other tax liabilities. For example, a gift of an asset since purchase to someone who is ‘connected’ with you (such as an adult son or daughter) can give rise to capital gains tax liabilities for you if the asset has risen in value between purchase and gift, although there may be some planning opportunities to defer this liability until the asset is sold to a third party. Similarly, if you made a gift of a property which was subject to a mortgage and the recipient took over responsibility for the debt, you could trigger a Stamp Duty Land Tax charge on the transfer.  Due to the complexity and interaction of the various taxes, it is well worth taking professional advice before any action is taken.

At Wright Vigar we have a team of Tax specialists who would be delighted to help you. Please contact Pam Durham or one of our Tax team on 0845 880 5678 for more assistance.