Printer Friendly

There are ways and means of avoiding 'voluntary' tax; ADVERTISING FEATURE Independent financial advice.

PAUL Brokenshar of Investec Wealth & Investment says this month's article complements his previous views about Inheritance Tax Planning (IHT), and he says it will be of particular interest to those who have received an inheritance within the last two years which has created or indeed exacerbated an existing IHT problem.

He reports that IHT is payable at a rate of 40% on the value of one's assets exceeding the current Nil Rate Band of pounds 325,000 per person (or pounds 650,000 in some cases for married couples). He also reports that it is quite commonly referred to as a voluntary tax because it can be easily reduced or indeed avoided altogether through judicious financial planning.

Paul says there are different ways of mitigating IHT. He explains: "For example, one is able to give away assets; however, it takes seven years for the value of the gift to fall outside the inheritance tax equation.

"Furthermore, the donor would not be able to reserve the right to benefit from the assets being given away in order for the transaction to be effective, which can prove too restrictive for some people. For those who cannot afford to make outright gifts then certain types of trust can be used which can help to circumvent this issue."

He says there is also the option of investing in assets which qualify for Business Property Relief, such as shareholdings listed on the Alternative Investment Market, which will be exempt from IHT if they are held two years immediately before death. Either way, these various methods require one to live for anywhere between two and seven years post-implementation in order for them to be effective.

Paul reveals: "There is, nevertheless, another extremely effective, yet commonly overlooked, option available to those who have received an inheritance within the last two years. This is known as a Deed of Variation and it can be used to deliver immediate relief from IHT.

"This can enable the beneficiary to vary the deceased's will with the subsequent aim of passing their inheritance into a trust. This trust is then deemed to have been set up by the deceased rather than the beneficiary of the estate for IHT purposes."

He says this means those assets which had been inherited are then immediately removed from the original beneficiary's estate and the usual 'seven year' rule is bypassed. Moreover, they would also be able to benefit fully from their inheritance at any point in the future without breaching the Gift With Reservation rules and this is the key benefit - immediate relief from IHT without any restrictions on accessibility. He adds that to be successful this planning must be carried out within two years from the date of death by the person who has inherited the assets. ? Paul Brokenshar is a Chartered Financial Planner. He is an Associate of the Personal Finance Society and an Affiliate Member of the Society of Trust and Estate Practitioners.


Paul Brokenshar
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2012 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:Daily Post (Liverpool, England)
Date:Sep 17, 2012
Previous Article:Deaths.
Next Article:Fast-track us to quicker internet; ...that's call from MPs.

Terms of use | Privacy policy | Copyright © 2019 Farlex, Inc. | Feedback | For webmasters