Taken from the Telegraph Money – 5:17PM BST 13 May 2013
For a variety of reasons, many people potentially affected by Inheritance Tax prolong the decision to act. When it comes to Inheritance Tax planning, the longer you wait, the fewer options you will have available to you. This could prove to be a costly mistake: the sooner you seek guidance, the greater the flexibility you will have.
For joint estates, a review and re-alignment of existing assets may be a potential solution, but this can take some time to arrange. You could also take out a life insurance policy to cover the cost of your potential Inheritance Tax liability, but the cost of doing so would prove considerably higher, the older you are when taking it out.
Even the effectiveness of taking more simple steps could be diluted by delaying taking action. For instance, everyone is entitled to gift £3,000 exempt from Inheritance Tax in any one tax year. You can give bigger financial gifts, but the key here is that you must live for at least seven years from the date of the gift before it is free from tax. Unfortunately, by leaving it late, your options may considerably reduce.
IT’S ONE OF THE BIGGEST SAVINGS YOU COULD EVER MAKE
Putting off making adequate plans to tackle a potential Inheritance Tax liability could have serious consequences for your loved ones. If the value of your estate is above a threshold of £325,000 if you’re single, or £650,000 if you’re married (if you’re widowed, it is up to £650,000 depending on how much allowance was used when your partner passed away), you could be liable for a 40pc tax bill on everything you own above your threshold. In most cases, your loved ones would have to find the money to pay this bill before they can inherit what you want them to have.
There are financial planning steps you can take to tackle your liability to either reduce or, in some cases, eliminate a potential 40pc bill altogether.
NO-OBLIGATION ADVICE OFFERS YOU PEACE OF MIND
The Telegraph Inheritance Tax Service, provided by Skipton Financial Services Limited (SFS), can help you establish if you have, or in future may have, an Inheritance Tax liability. An SFS Adviser is then able to provide recommendations on addressing the problem, suited to your personal circumstances.
Mark Elliott, SFS Technical Research Manager, explains: “It’s never too early to start planning for Inheritance Tax. With the March 2013 Budget confirming that existing thresholds will be frozen until at least 2018 – and no guarantees they will rise after that point – seeking advice now could offer you peace of mind that you are doing everything you can to protect your loved ones’ inheritance and potentially save thousands of pounds.”