Inheritance Tax & Estate Planning

Inheritance Tax & Estate Planning

It’s important to plan for your family’s future. Those plans will need to consider how you protect assets, give assets away directly or in a controlled manner, reduce inheritance tax and put in place estate planning solutions. Inheritance tax planning and estate planning are not something you do through a will, it starts during your lifetime and requires careful consideration.

Protecting family wealth is about identifying life events and risks while planning for them in advance. Our proactive process considers your objectives for family wealth during your lifetime and after. Planning the passing of wealth to the next generation is complex, especially if that wealth is to grow for more generations. We work with families to understand their current and future wishes and needs.

We will explore different potential future scenarios to ascertain what level of control or protection over wealth is desired and to find you the right estate planning solutions. We will help you build a strategy to pass assets in a way that meets the family objectives, is tax efficient and reduces the exposure to inheritance tax. That strategy may evolve over time and we will proactively review your objectives to ensure family wealth has the best opportunity to benefit those you want it to.

Your strategy begins during your lifetime although it is essential that your will continues to meet your desired results. To properly draft your will requires an understanding of what your lifetime plan will be. For example, you may create a trust during your lifetime that could receive certain assets through your will. Alternatively, it may be that your will creates a trust only in specific circumstances such as your children being minors. We often find that wills are written without consideration for lifetime estate planning. To get your personal estate planning right, you should consider what is important to you during your lifetime and upon your death.

We will work with you to:

  • Ensure you understand the inheritance tax threshold in the UK and what this means for you and your estate.

Inheritance tax can be tricky so we will help you, your spouse or partner understand using the nil band rate, what it means for your estate and what can be done to minimise your tax liability. We will also explain how the nil rate band applies to property.

  • Find the correct estate planning solutions for you and your family depending on your needs.

We will explain the many factors involved in estate planning including age, health, wealth and more and we'll work with you to determine the most relevant solutions for you and your family.

  • Locate any possible exemptions from inheritance tax for your estate.

We will work with you to identify any appropriate transfers that can be made in your lifetime to reduce your inheritance tax liability including gifts and using certain exemptions.

  • Put together a personalised estate planning strategy.

Your estate planning strategy will be influenced by many factors including age, health, family commitments and the type of assets you own. We will create a personalised plan for you regardless of your situation.

  • Set up a charitable trust.

Setting up a charity or a charitable trust is a noble endeavour and we will ensure it goes smoothly. We will walk you through everything from finding the purpose for your charity and creating the governing documents to determine the structure and registration.

  • Advise on controlled lifetime gifts to mitigate inheritance tax.

Controlled lifetime gifts are ones that put restrictions on the recipients. They include gifts to a trust or foundation, shares or partnership interest. We will advise if any of these are right and will go through the implications of each one so you can make the appropriate decision for you and your estate.

  • Pass on your assets through family and legacy wills.

Passing on a legacy to future generations is one of the most important things a person can do. We will work with you to determine your wishes and how to best secure your estate for family members through trusts and gifts.

Case Studies

Case Study 1: Mitigating Inheritence Tax

Jane had survived her husband and following his untimely passing, she inherited all his assets. Jane had three children and four grandchildren. Her assets included the family home, a small investment portfolio and a property portfolio. Jane wanted to continue living in the family home and required an income stream from either the investment or property portfolio. Jane wished for the assets to pass to future generations in a manner that they were protected in the event of divorce or bankruptcy and so that the grandchildren could have some benefit although controlled.

Following an agreed fixed fee proposal, we prepared a report setting out options available to Jane and then met several times to discuss her desires. We agreed on a strategy involving placing the property portfolio into a company. Shares were then given away over a period to children and a grandchildren’s trust. The grandchildren’s trust allowed the meeting of school fees tax efficiently. We held annual meetings with Jane and agreed on revising the strategy and provided tax advice on what investments could be made to mitigate inheritance tax. Advice considered discounted gift trusts as well as investing in assets qualifying for business property relief, agricultural property relief and woodlands relief. Jane subsequently invested in assets that would qualify for business property relief after the minimum ownership period and transferred some of those assets to the grandchildren’s trust without incurring chargeable lifetime transfer. We also assisted to amend Jane’s will to ensure some assets on death would go to the grandchildren’s trust.

Case Study 2: International Property Settlement

Marco had established an offshore excluded property settlement many years ago, whilst non-UK domiciled. He was contemplating whether to remain in the UK permanently. Marco and his wife’s personal assets included a lease interest in a London property and a handful of debentures.

We qualified what Marco and his wife’s exposure to inheritance tax was and provided suggestions on how it might be reduced. We also considered the excluded property settlement, which had become exceptionally complicated. We were engaged by the trustees to advise on the benefit of the settlement and how it could be simplified. We undertook this review mindful of Marco’s desire to pass on assets to his daughters and grandchildren. One daughter resided in the US with her family and, therefore, we considered the US implications also.

Following revisions to the structure, we assisted with draft letters of wishes and wills to facilitate the long term plan for passing family wealth.

Case Study 3: Family & Business Future Strategy

Mike and Lucy owned shares in a trading business, their main home, investment properties, and a stocks and share portfolio. Their company employed their children and had significantly funded their pension scheme.

We provided a staged proposal with fixed fees for an initial quantification of liabilities and outline suggestions for discussion. Following the outline report, we met to discuss the options available. After the first meeting, it was decided that wills would be amended although planning would be postponed until a decision had been reached on the future of the business.

A while later we met with Mike who confirmed that his children did not want to take forward the family business. Mike and Lucy wished to consider the potential of selling the business to management. It was established that the proceeds weren’t required for lifestyle and the funds would ultimately be given to the children. We discussed the possibilities of retaining an interest in the business within a trust, a purchase of own shares and a vendor-initiated management buyout. We also looked at utilising the business property relief available on the shares to fund a trust ahead of the sale. Consideration was also given to how the pension could be used as an estate planning vehicle, placing properties into a company and divesting shares over a period, as well as IHT efficient investments structures.

Contact Edge today for IHT & Estate Planning assistance