What will your legacy be?
Securing more of your wealth for the benefit of your loved ones means the careful planning of what will happen after your death to help make their lives easier and give you greater peace of mind
by our Intergenerational Wealth Transfer Service
What will your legacy look like?
It may not be pleasant to contemplate your death or what happens afterwards but the careful planning of your financial and tax affairs means your loved ones are free to carry out your wishes and be protected from the burden of Inheritance Tax.
Passing on your assets efficiently
Without good financial arrangements your family could find themselves having to pay substantial inheritance tax in the event of your premature death. Passing aon ssets tax efficiently to the next generation is a key objective for those who have spent a lifetime building wealth. NextGen IntergenerationalWealth Management Service is here to help you.
Are any financial assets exempt from Inheritance Tax?
The rate of tax on death is 40% and on financial transfers while you’re alive it’s 20% where applicable. However, the first £325,000 is exempt from tax. This is known as the Nil Rate Band which has been frozen at £325,000 since 2009 and will continue until 5 April 2026. An additional Nil Rate band has been introduced for death occurring on or after 6 April 2017 where an interest in a qualifying residence passes to direct descendants. The amount of this relief, phased in over 4 years, is set at £175,000. For many married couples and registered civil partnerships, each spouse or partner enjoys the principal nil rate band and can benefit potentially from the additional residence nil rate meaning that overall tax relief could double.
Will giving during my lifetime reduce the tax liability?
HM Revenue & Customs also allows you to make a number of small gifts each year during your lifetime that are exempt from Inheritance Tax. Every individual has a separate allowance which is doubled if both spouses or both registered civil partners use their allowance.
Can I make larger gifts exempt from tax?
You may also make larger gifts known as Potentially Exempt Transfers (PETs) providing these are made not less than 7 years before your death. Any other gifts you make during your lifetime that do not qualify as PETs, and known as Chargeable Lifetime Transfers (CLTs), will be liable to Inheritance Tax. One example is a gift made into a discretionary trust.
Is anyone or anything exempt from Inheritance Tax?
Members of the armed forces killed in action or whose death is hastened by injuries sustained on active duty are exempt from Inheritance Tax and farmers may enjoy up to 100% tax relief when making gifts of agricultural land or farm buildings.
Will life insurance help pay Inheritance Tax?
If you decide that you don’t want to gift your assets while you’re alive you can take out life cover which, on
death, can pay out an amount equal to your Inheritance Tax liability. Equally, taking out a life insurance policy, written under an appropriate trust, could be used towards paying any eventual Inheritance Tax liability. Your E&G adviser will help you decide what to do.
Which financial transfers are exempt from Inheritance Tax?
HMRC will allow the following transfers -
- Up to £3000 each year as a single gift or a number of gifts 1
- Gifts of up to £250 to any number of people
- Any amount from income given regularly 2
- £5000 to your child if they are getting married
- £2500 to a grandchild or distant descendant if they are getting married
- £1000 to a friend or anyone else you know
- Donations to charities, political parties and universities 3
- Maintenance payments to spouses, ex spouses, elderly or infirm dependant relatives
- Maintenance payments to children under 18 or in full time education
Certain other gifts can also qualify for relief -
- Gifts from a small business, sole trader or partnership
- Shares in companies listed on the smaller, riskier stock exchange or the Alternative Investment Market (AIM)
1 If you don’t use the full allowance in one year you can carry the remainder over into the next tax year
2 Provided it does not reduce your standard of living
3 Plus certain other bodies recognised and approved by HMRC
Help & information
If you would like further information on how E&G Inheritance could help you, please call us on 020 8396 0486 or email us at email@example.com.