Talking about inheritance with your family

There are two certainties in life – death and taxes – and these are the very two things that no one likes to talk about.

Yet, to avoid these two topics can mean a significant tax bill for your loved ones when they inherit from you.

Talking about inheritance with your family
Family – Provided via Shutterstock

Remember, inheritance tax is a voluntary tax that you can plan for so why pay more than you have to. It is painful to think that almost half of your hard earned wealth, on which you’ve already paid taxes, will go to the taxman rather than your loved ones. On top of that, inheritance tax needs to be paid before your loved ones can receive the non-property assets. It may mean that your loved ones have to sell the family home to pay the tax bill but this can easily be avoided with a little planning.

Most people don’t think that they will be affected by inheritance tax. In the past, it was very much seen as an issue for the rich. Not anymore. Considering rising house prices and a frozen inheritance tax threshold, more and more households are liable for inheritance tax. The amount of money raked in by the Treasury from inheritance tax has soared by 70 per cent in the last five years, new findings reveal. Last year, HM Revenue and Customs collected £4.6billion from inheritance tax, compared to £2.69billion in 2010, data from the Office for National Statistics reveals.

We know how easy it is to shy away from planning for inheritance tax. You may fear that it will mean a loss of financial control or that you won’t have enough to live on. More often than not, it is simply something that you may not want to think about it. Just talking about inheritance can, for some people, be difficult and sensitive – not really an ‘appropriate’ subject to bring up during Sunday lunch!

Instead of avoiding the topic, it really is worth having a conversation with your loved ones about it. How you do this will depend on the dynamics of your family but, at some point, it is good to get eve-ryone together to ensure that your children/loved ones are clear about the assets and how they are to be divided.

Leaving it too late potentially means a huge tax bill on the horizon with very few options to reduce it. What commonly happens is that people only start to think about inheritance when they have moved into a care home. Children usually assume Powers of Attorney (PoA), at which point, they seek out a financial adviser to help them mitigate inheritance tax. At this late stage, there are only really a couple of options – gifting money or investing in assets that qualify for Business Property Relief (BPR).

So, act now. If you have an estate liable for inheritance tax, then the sooner you start to plan, the better.

The first step is to make sure you have a well written will. This will ensure that your assets go where you want them to go.

The next step is to work with your solicitor and financial adviser to come up with a coherent strate-gy. With a well written will, careful cash flow planning and a flexible financial plan, you can mitigate inheritance tax while preserving your net wealth and cash flow.

Give yourself peace of mind and clarity for the future by acting today.

About the author – Gemma Stanbridge

Gemma has been advising a broad range of loyal clients, including professionals, entrepreneurs and retirees, for almost a decade. She prides herself on the long-term relationships she has built over the years, which allows her to help clients meet their financial goals throughout the different stages of their lives.

While Gemma provides a range of financial services to help clients grow their wealth and assets, she specialises in retirement planning and inheritance tax. Most people do little or no planning in this regard. Recognising this, particularly for inheritance tax, Gemma heads up a team at Westminster Wealth Management that focuses specifically on this area of financial planning. Clients are able to plan for retirement and mitigate inheritance tax liability in a controlled, flexible and effective way while maintaining their quality of life..

Gemma is a fellow of the Personal Finance Society, the highest qualification a financial adviser can hold, and an affiliate of the Society of Trust and Estate Practitioners. In 2015, she received WATC’s Rising Star award for Investment Manager of the Year. This recognises individuals who are seen as having the potential to become a future leader in their industry and who strive for results.

To receive a complimentary guide covering Wealth Management, Retirement Planning or Inher-itance Tax Planning, please contact Gemma Stanbridge on 02070967021 or [email protected]

The Financial Conduct Authority does not regulate tax advice or estate planning. Information is based on our current understanding of taxation legislation and regulations, which is subject to change.

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