Estate planning remains as essential as ever
despite last year’s announcement that a surviving
spouse or civil partner can inherit their deceased
spouse’s or partner’s inheritance tax (IHT) nil rate
band. That change is certainly welcome, but
couples may still be able to save more IHT by
passing on assets at the time of the first death.
While lifetime gifts continue to be important, there
are also vital non-tax-related issues to consider.
The starting point of any estate planning is not tax,
but to consider your family circumstances and
what you wish to achieve. What is best for you will
depend on your financial position and that of your
potential heirs, and also what might happen during
your lifetime and during theirs.
For example, many people want to provide for a
surviving spouse while making sure their children
inherit eventually. Passing all assets to a spouse or
partner on the first death will now not necessarily
waste a nil rate band, but the family’s wealth may
never reach the intended beneficiaries.
Despite the tax changes in March 2006 that ended
the favourable tax treatment of some types of trust,
a trust is still a useful tool for ensuring the required
succession and can help protect assets against
unforeseen risks, such as a spendthrift heir, divorce
and bankruptcy.
Passing on assets on the first death can also save
IHT. The value of the assets may increase faster
than the value of the nil rate band and remarriage
would limit the amount of nil rate band that can be
inherited.
Above all, flexibility is important. Circumstances
change, as do tax rules. We can help you to
formulate your wishes and make sure that your
estate planning will achieve them in the most taxefficient
way.
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