Navigate Inheritance Tax with Confidence
Expert advice on Wills and Inheritance Tax for peace of mind and wealth preservation.
Lasting Power of Attorney
At Westminster Law, we understand that planning for the future is one of the most important steps you can take to protect your family’s financial wellbeing and ensure your wishes are respected. People often think it is only about drafting a Will and distribution of the estate after death. However, it can be crucial in some situations. Some actions to reduce inheritance tax (IHT) liability need to be timely, for instance if you gift money or property to someone and live for 7 more years, it won’t count as part of your estate for IHT.
Other decisions can only be taken whilst you have the mental capacity to act as defined by the Mental Capacity Act (2005). Estate Planning can also be useful for parents with small children and used as a tool to protect the child's future and appoint guardians. Proactive planning allows you to address key issues and ensure that your wishes are respected, and your family is supported in the future and provides peace of mind during your lifetime.
Key benefits of our service for your peace of mind:
- Lawyers experienced in Estate Planning
- Professional background and qualifications
- No hidden costs
- Convenient home visits
On this page:
Key benefits of our service for your peace of mind:
- Lawyers experienced in Estate Planning
- Professional background and qualifications
- No hidden costs
- Convenient home visits
What Is Estate Planning?
Estate Planning very broadly involves maximising your estate and passing it on efficiently in a way that achieves your aims. In simpler terms it is the key process of the management and distribution of your estate during your lifetime and after death. This is a complex process that includes different aspects. A significant part of Estate Planning involves addressing the implications of Inheritance Tax. Estate Planning uses a range of legal tools and strategies designed to:
- Protect and manage your estate.
- Minimise Inheritance Tax (IHT) liabilities.
- Protect vulnerable members of your family.
- Establish clear instructions for the distribution of your estate.
- Appoint trusted individuals to carry out your wishes.
- Ensure the distribution of your estate in complex or difficult family situations.
- Organise and safeguard your estate, offering ways to address future financial considerations, including those related to care needs.
An effective Estate Plan not only safeguards your assets but ensures that your family’s financial future is secure, with minimal tax burdens.
Key Components of Estate Planning
Estate planning involves drafting legal documents such as Wills, Trusts, and Powers of attorney and requires a sound understanding of the UK law and tax regulations.
Drafting a Will
A Will is a legal document that specifies how a person’s estate should be distributed after death and involves appointing executors, beneficiaries, guardians, and sometimes includes specific bequests.
Inheritance Tax (IHT) planning
In the UK, the standard IHT rate is 40% and it applies to the value of the estate exceeding the nil-rate band (NRB), which is currently set at a £325,000 per individual. There are different criteria that have impact on IHT liability and tax value.
Trusts
Trusts can be particularly useful for safeguarding estates, ensuring financial stability for vulnerable beneficiaries, and mitigating IHT. Trusts are a flexible tool that can protect assets under specific conditions.
Lasting Powers of Attorney (LPA)
A Lasting Power of Attorney is a legal document that allows you to appoint someone you know and trust to make decisions on your behalf, should you become unable to do so in the future.
Business Succession Planning
For business owners, Estate Planning ensures a smooth transition and protects the company’s stability, securing its future.
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Contact
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Estate Planning FAQ
Is Estate Planning and Will Writing the same thing?
No, they are not. Will writing involves preparing a legal document that sets out one's wishes as to the distribution and administration of their estate. Estate planning is a broader process that encompasses will writing but also includes the management of one's assets during their lifetime, the reduction of potential tax liabilities, and protecting assets for the future.
Do I need an Estate Plan if I already have a Will?
Yes, although a Will is a vital component of Estate Planning, the latter covers broader aspects, such as tax planning, setting up Trusts, making lifetime gifts and ensuring financial security for your loved ones.
Can I update my Estate Plan to reflect changes in IHT laws?
Yes. We recommend that our clients review their estate plan and make updates as necessary, as tax laws change, to ensure they remain effective and aligned with current legislation. Our recommendation is to review every 3-5 years or when major changes in legislation take place.
How often should I review my Estate Plan?
We advise to review your estate plan every few years or after major life events, such as marriage, divorce, the birth of a child, or changes in tax laws.
How can I protect vulnerable beneficiaries?
The best approach for protecting vulnerable beneficiaries depends on your personal circumstances. Trusts can be a useful tool when protecting a part of your estate for the benefit of a vulnerable person.
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Inheritance Tax Planning
Effective Inheritance Tax Planning is an essential aspect of preparing for the future. It helps to understand potential tax liabilities for yourself and your loved ones, protect certain assets and mitigate Inheritance Tax payments.
What is Inheritance Tax (IHT)?
IHT is primarily a charge on assets held on death, including shares of assets jointly held with others. Lifetime gifts made in the seven years before death can also be brought back into account.
What are the current Inheritance Tax rates?
When a person passes away, the IHT charge on the estate is 0% on the nil rate band which currently allows everyone to have a £325,000 tax-free allowance and 40% on the remaining balance.
Key benefits of our service for your peace of mind:
- Lawyers experienced in Estate Planning
- Professional background and qualifications
- No hidden costs
- Convenient home visits
It is very important to review your Will and the value of your estate:
- At regular intervals or at least every five years.
- Whenever there is a significant change in your circumstances.
Key benefits of our service for your peace of mind:
- Lawyers experienced in Estate Planning
- Professional background and qualifications
- No hidden costs
- Convenient home visits
Key Aspects of Inheritance Tax (IHT)
- Nil-Rate Band (NRB): The nil rate band is currently £325,000. However, the nil rate band available on your death may vary as it can be used up by lifetime gifts made in the seven years before death.
- Residence Nil-Rate Band (RNRB): If you give your home to direct descendants such as your children and grandchildren or certain other beneficiaries, from 6 April 2017 your estate can benefit from an additional residence nil rate band (RNRB). The other beneficiaries include adopted children, stepchildren and foster children, as well as the spouses and civil partners of all these beneficiaries.
- Gifting: Certain gifts are exempt from IHT and do not use up your nil rate band.
- Reliefs: Business Property Relief (BPR) and Agricultural Property Relief (APR) can reduce or eliminate IHT on qualifying assets.
- Trusts - Trusts are a way of looking after assets (money, investments, land or buildings) for people. It is possible to establish a Trust in a Will to govern how beneficiaries enjoy the benefit from your assets after you die.
Inheritance Tax Planning FAQs
Does everyone pay Inheritance tax?
No, the obligation to pay depends on different parameters such as the value of your estate, to whom you want to bequeath it, gifts during lifetime, the type of assets and other variables.
How can I avoid Inheritance Tax?
During your lifetime there are different strategies that could help you to arrange your estate and mitigate IHT.
How much money can be given to a family member as a gift in the UK?
By law, there is no specific limit on the amount of money you can gift to a family member. The main factor you should take into consideration is the tax burden that may be incurred upon your death. It depends on the amount, timeline and occasion.
Where does the burden of IHT fall?
Where the burden of IHT falls, that is which assets may be used to pay the IHT, depends on what is in your estate when you die and the provisions of your Will.
When is Inheritance Tax due?
IHT is usually due within six months after the date of death. If not paid within this period, interest may accrue on the outstanding amount.
Can I transfer my unused IHT allowance to my spouse?
Yes. If you do not use your full nil-rate band, your spouse or civil partner can inherit the unused portion, effectively doubling their threshold for IHT purposes.