Looking after your children doesn’t end when they leave home. You will want to create a financial legacy to ensure that the wealth you have created is preserved, protected and passed on to them.Preserving as much of your wealth as possible requires careful estate planning.
Inheritance tax (IHT) is a 40 per cent tax imposed on the estate of anyone who is UK-domiciled on all assets above £325,000.The threshold is normally updated each year in line with inflation, but the Coalition has said that it will now be frozen until at least April 2015, and subject to further legislation the freeze will be extended up to and including the 2017/2018 tax year.
One of the simplest IHT mitigation tools is a Will. Not only can a well drafted Will mitigate IHT, it is also crucial for anyone wanting to protect their family from a huge headache after they die. Only with an appropriately drafted Will can you be certain that your estate will go to the right people.
In addition to Wills, Trusts can also help you to protect and preserve your estate as they allow you give away assets but restrict or direct how and when they are used. There are many different types of Trusts, some straightforward and others very complicated.
To ensure that the assets are invested in accordance with the terms of the Trust you should ensure that you appoint trustees who have the necessary skills and knowledge. Money and family arguments are often driven by emotion rather than what is correct and appropriate.
Another method for helping to reduce any potential IHT burden is gifting away money before you die. Put simply, if you wish to pass assets to family and friends during your lifetime, these gifts will only be made free of IHT providing you survive seven years from the date of making the gift.
You can gift up to £3,000 a year, which can be divided between as many people as you like. You are also allowed to use the previous year’s allowance if it has not been used. Parents are each allowed to give away £5,000 to their children when they get married, while grandparents can give £2,500.
Being a parent brings with it rich rewards, from watching your children walk their first steps, to applauding them when they walk on stage to collect their graduation scroll.
But such rich rewards do not have to be only emotional; they can be real too, with a little foresight and some expert financial help.
To receive a free guide covering Wealth Management, Retirement Planning or Inheritance Tax Planning, contact Simon Hoadley Wealth Management Ltd on 01323 431938.