Inheritance Tax: once more a pressing issue for local residents
After two successive manifestos promising a £1,000,000 inheritance tax free band and after the General Election result which should have heralded this welcome change we now find that the situation, whilst still unclear, will certainly be somewhat different from that indicated.
The changes are not due to start until 2017 and then on a graduated basis until 2021 when the full additional inheritance tax exemption will, we are told, be available. At the moment the new rules are unconfirmed but we know that they are not going to be such that there will be a plain and simple £1,000,000 nil rate band for all estates.
Indeed the Chancellor has said that an estate will only qualify for a £1,000,000 IHT exemption if: (a) it includes a property (or did include one from July 2015 and until the deceased moved into permanent residential care) and (b) if that property is given in the Will to certain individuals. The list of qualifying individuals at the moment includes children and grandchildren for example but not nephews and nieces. Paradoxically just as the debate on whether we should leave the European Union is underway we seem to be facing what looks like “forced heirship” – a very European phenomenon!
With so much uncertainty over the impact of the new rules there never has been a more pressing time, especially in this part of the country, to undertake with the help of a specialist lawyer robust IHT planning and secure what tax savings you can for your beneficiaries. These steps might include a variety of regular or annual gifting patterns all of which will be tax free at the point of giving. This will help to ensure that your capital is kept within certain limits and unspent income does not turn into capital only to be lost to the Revenue when you die at 40%. Your Will, too, should be reviewed now with a view potentially to incorporating a Discretionary Trust so that if you do die before 2021 your Executors have the flexibility to take advantage of the new tax exemption if they possibly can.
A Discretionary Trust may seem complicated and is not necessary for everyone but for those otherwise facing a large Inheritance Tax bill it could make the difference between giving to your loved ones or giving to the Inland Revenue. A choice, which more most, is an easy one to make!