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 Tax-efficient estate planning
Keeping inheritance tax to a minimum
An estate plan that minimises your tax liability is essential. The more you have, the less you should leave to chance. If your estate is large it could be subject to inheritance tax (IHT), which is currently payable where a person’s taxable estate is in excess of £325,000 (frozen until 5 April 2026). However, even if it is small, planning and a well-drafted Will can help to ensure that your assets will be distributed in accordance with your wishes. We can work with you to ensure that more of your wealth passes to the people you love, through planned lifetime gifts and a tax-efficient Will.
You should start by considering some key questions:
Who? Who do you want to benefit from your wealth? What
do you need to provide for your spouse? Should your children share equally in your estate – does one or more have special needs? Do you wish to include grandchildren? Would you like to give to charity?
What? Should your business pass to all of your children, or only to those who have become involved in the business, and should you compensate the others with assets of comparable value? Consider the implications of multiple ownership.
When? Consider the age and maturity of your beneficiaries. Should assets be placed into a trust restricting access to income and/or capital? Or should gifts wait until your death?
Making use of lifetime exemptions
You should ensure that you make the best use of the available lifetime IHT exemptions, which include:
y the £3,000 annual exemption
y normal expenditure gifts out of after-tax income
y gifts in consideration of marriage (up to specified limits)
y gifts you make of up to £250 per person per annum
y gifts to charities
y gifts between spouses, facilitating equalisation of estates (special rules apply if one spouse is non-UK domiciled).
Spouses and civil partners
On the first death, it is often the case that the bulk of the deceased spouse’s (or civil partner’s) assets pass to the survivor. The percentage of the £325,000 nil-rate band not used on the first death is added to the nil-rate band for the second death.
 Estimate the tax on your estate
  Value of: Your home (and contents)
Your business1
Bank/savings account(s)
Stocks and shares
Insurance policies
Other assets
Total assets
Deduct: Mortgage, loans and other debts
Net value of assets
Add: Gifts in last seven years2
Less: Legacies to charities
Deduct: Nil-rate band
Deduct: Residence nil-rate band
Taxable estate £
Tax at 40%/36%3 is £
Making a Will
– 325,000
                Case Study
  Clive and Rita were married. Clive died in May 2008, leaving £50,000 to his more distant family but the bulk of his estate to Rita. If Rita dies in 2021/22 her estate will qualify for a nil-rate band of:
 1. If you are not sure what your business is worth, we can help you value it. Most business assets currently qualify for IHT reliefs
2. Exclude exempt gifts (e.g. spouse, civil partner,
annual exemption)
3. IHT rate may be 36% if sufficient legacies left to charities (see later). The tax on gifts between three and seven years before death may benefit from a taper relief.
    If you own such possessions as a home, car, investments, business interests, retirement savings or collectables, then you require a Will. A Will allows you to specify who will distribute your property after your death, and the people
who will benefit. Many individuals either do not appreciate its importance, or do not see it as a priority. However, if you have no Will, your property could be distributed according to the intestacy laws.
Nil-rate band on Clive’s death
Used on Clive’s death
Unused band
Unused percentage
Nil-rate band at the time of Rita’s death
 Entitlement 183.97% Nil-rate band for Rita’s estate £597,902
If you die within seven years of making substantial lifetime gifts, they will be added back into your estate and may result in a significant IHT liability. You can take out a life assurance policy to cover this tax risk if you wish. However, you can make

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