Inheritance TaxInheritance Tax consequences are still vastly under estimated

Spending your whole adult life accumulating assets and creating wealth for yourself and your family is a very natural thing to do.

After you have made maximum use of those assets it would be a reasonable assumption to feel comfort in the fact that they will then be passed down to your beneficiaries for them to have life made that little bit easier for them because of your endeavours.

If I told you that the Government were to bring in a new tax that would penalise your beneficiaries for receiving your hard earned money it would be controversial at best. If we said that it was to be set at 10% that would feel like an injustice. but set it at 40% and it’s almost not worth having the assets by the time you come to pass them on.

Sure, there is a nil rate band, the level of assets on which 0% tax is payable, which is £650,000 for married couples or £325,000 for individuals. But when you go above that then there is relatively little to be left after the Government has taken their share.

So to me it makes so much sense to try everything you can to avoid having to pay this penal tax. Here are a few options you might want to consider:

1) Give it away early – if you think you can afford it then try giving some money away early. This has the benefit of knowing where your money will be going and what it might be used for. You must live for seven years after making the gift for it to be effective though.

2) Give regular gifts – if you have excess income that is just adding to the value of your estate then why not give that surplus income away. This is free of inheritance tax immediately and again has the benefit of being given away at a time and in a way that you are completely in control of.

3) Spend it – of course the easy thing to do would just be to spend it if you are that way inclined. If you’ve spent a lifetime creating your wealth and you are happy that your beneficiaries will be just fine then why not have some fun with it. There are no second chances to this after all.

4) Take out life cover – this one allows you to keep the assets in your name and control of them. If you feel you might need access to the assets in later life, e.g. for care fees, then taking out life cover to pay off the inheritance tax bill can be a very cost effective way of addressing this issue.

5) Invest in business assets – assets that attract business property relief can be free of inheritance tax after just two years and so could be a reasonable option later in life.

Please contact us if you wish to discuss any of these options.

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Blog by Jaskarn Pawar

Jaskarn Pawar is an experienced and award winning Chartered and Certified Financial Planner. He advises people all over the UK on financial planning and wealth management issues to help them reach solutions to fit their personal needs. You can contact Jaskarn on 01604 211234 or by e-mail on