To quote Benjamin Franklin; ‘nothing is certain except death and taxes’. This could not be any more true in today’s world.
Covid-19 has presented significant challenges to people and the economy. With the number of deaths increasing on a daily basis, we are experiencing a marked increase in the number of IHT queries coming through our TaxDesk as advisers are receiving more questions from their clients in relation to IHT and wills. An updated will is always a good piece of advice. However, the inevitable question is “how can I reduce the IHT exposure on my estate?”
Estate planning needs to be looked at on a case by case basis but for individuals who are looking to minimise IHT liabilities, both now and in the future, here are some tips:
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With effect from 6 April 2020, the residence nil rate band (RNRB) allowance was increased to £175,000. However, this allowance is tapered away if the net value of the estate exceeds £2 million. Individuals should consider making gifts now so that the net estate is below the £2 million threshold in order to secure this allowance.
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Where an estate is in administration, and certain assets are being sold for less than the date of death value, it may be possible to reduce the inheritance tax liability and make a repayment claim.
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Where a donor has made a gift to an individual and the donor dies within seven years of making the gift, the recipient may be liable to IHT. If the value of the gift is worth less at the time of death, then the recipient can make a claim to reduce any IHT liability due on that gift.
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In a situation where the death has already taken place, it may be advantageous to vary gifts in an existing will to utilise certain exemptions and reliefs, and thereby save IHT.
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Individuals may wish to gift assets which currently qualify for business property relief to an individual or trust instead of holding onto them until death. The government is providing significant Covid-19 support and this will have to be paid for. There are always rumours about the abolition of business property relief so it may be worthwhile banking the relief now while it is still available.
The above are just some ideas to start the thought process; it is important to consider each individual’s personal circumstances before providing advice as well as considering other taxes which could be impacted by planning.
If you would like us to review your IHT position or require advice on a death estate please contact Reena Bhudia on 020 3805 7466 or email at reena.bhudia@markel.com
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