One of the main considerations in Inheritance Tax Planning (IHT) is to make sure you think about it early enough, leaving inheritance tax planning late can mean you really restrict what you can do to help mitigate IHT on your death. A common example we see is when parents come to us and say they want to give away assets in their estate, but they're concerned about how they can retain control of those assets, they want to also protect the capital that they're giving away from perhaps a marriage breakdown or a bankruptcy in a future generation of their family that are due to benefit from those assets.
It is really important to understand your inheritance tax liability because that can help you decide what planning you might want to do now, or in the future when the time is right to help mitigate any inheritance tax liability there may be on your death. There are lots of allowances and reliefs available but due to the complex tax rules they're not automatically available to everyone, which people often assume that they are. So by understanding your inheritance tax liability and considering what reliefs and allowances are available to you, you'll be able to put the appropriate planning in place so you fully understand what your inheritance tax liability may be on your death.
In terms of inheritance tax planning a common planning tool is the use of a trust. An individual can give assets away into a trust, but be a trustee of that trust fund and keep control of the capital and help protect the assets. It also gives them the flexibility to be able to pay an income to the beneficiaries of the trust, and if this is managed and controlled properly it can be very tax-efficient. We often find that a grandparent will set up a trust fund for their current or future grandchildren to help fund their school fees or other educational costs.
If you'd like to understand more about your current inheritance tax position, or to give you comfort that the right planning has already been done with regards to older generations of your family, you should seek advice to make sure you understand what your current inheritance tax liability might be, and also what reliefs and exemptions may be or could be available to you with the right planning. Of course any inheritance tax planning needs to be done in conjunction with making sure you have a current and up-to-date Will.
If you'd like to talk about this further or understand your inheritance position more please do contact us at RSM.