It isn’t just your savings and pensions that have to be considered. All your assets, including your house, must be distributed upon death. If you don’t plan carefully, one of the key beneficiaries could be HMRC, due to Inheritance Tax (IHT).
Naturally, the starting point of any discussion concerning your assets must be the assurance that your own needs are catered for. This not only includes your day to day living expenses, but also any future requirements that may require extra income.
This may involve matters out of your hands such as the peaks and troughs of the Investment Markets, or there could be a requirement in the future for some form of Long Term Care.
Whilst you may be fit and healthy at the moment, you don’t know what may happen and the last thing you want to be doing is giving all your money away in good faith and then requiring it back to pay for your care.
Naturally, it’s a fine balance between holding funds back to ensure that your own needs are catered for vs. finding that keeping too much back has generated an Inheritance Tax Bill for your beneficiaries.
Because this balancing act can be quite complex, seeking financial advice is absolutely crucial. However, the aim of this document is to offer an overview of things that need to be considered if you have the opportunity and desire to pass your wealth onto your beneficiaries.
As well as looking at how different assets are treated for the purposes of Inheritance Tax, we’ll consider some key factors to help people to manage this situation better.
Before you consider how individual assets are treated on death, you need to think about three key factors that will help you put your personal situation in a better light. They are:
Understand what will happen, take advice, consider what you can do now.
Inheritance Tax is described as a voluntary tax as careful planning can help you reduce or even avoid it. However, advice is essential.
This will happen to all of us at some stage, so the quicker you understand the implications and manage the situation, the better off everybody will be.
Whilst you must keep these three key factors front and centre, most important thing is to always seek financial advice. There’s no getting away from the fact that wealth distribution is complicated and wrong decisions could be very expensive. Always seek help in this matter.