Estate planning – that is, putting in place measures to ensure that our assets pass to the right people, and with the payment of as little tax as possible – is often put off. Sometimes this is due to the misconception that estate planning is too restrictive and results in loss of control of assets, which can be the case with lifetime gifts.
In actual fact, there are a number of estate planning solutions out there which are highly flexible in that they allow individuals to retain full control over their wealth and benefit from Inheritance Tax (IHT) savings at the same time.
For example, in general company shares are exempt from IHT as they qualify for Business Relief on death. However, if an individual ceases to own those company shares – due to, say, retiring and selling the business – then the proceeds of sale are held in cash and so immediately become subject to IHT on death at the rate of 40%!
Instead, it may be possible to put the share sale proceeds into an investment which qualifies for Business Relief. If the investment is made within three years of the sale of the shares, the investment could benefit from Replacement Business Relief and the assets be made exempt from IHT immediately. This is a saving of 40% of the amount invested, and in addition there was no need to consider making a lifetime gift of that cash so full access to the funds is maintained.
Investing in a Business Relief qualifying service can offer that win-win solution – a reduced IHT liability coupled with continued control over assets.
If you would like to talk about your estate planning options, then please contact us.