Now might be an advantageous time to utilise lifetime gifting to reduce Inheritance Tax liabilities, but there is also a broader tax picture to take account of too.
House prices have been rocketing, particularly in property hot-spots like London and the Southeast. The property boom means that more and more people are inheriting a family home worth several hundreds of thousands of pounds at around the time they are retiring and their children are flying the nest.
This is a situation that often comes up in our conversations with users of our service and often serves as the trigger point for people to seek professional wealth management advice for the first time – particularly if there are other complicating financial factors in view.
Over 2015, a fifth of our users described themselves as having received a large amount of money or other assets like property, and a third wanted help with retirement planning. We often speak to users in their fifties and sixties who have inherited a property and are seeking advice on what they should do with sums of around £250,000 and up – perhaps not enough to retire on, but certainly a large chunk of money which could mean a big boost to their lifestyle long term, if managed well.
But the property boom also means that many people may have been sleepwalking into leaving their beneficiaries with a hefty Inheritance Tax bill when they pass on. While property prices have been increasing meteorically, the Inheritance Tax threshold has not risen by anything like the same magnitude, nor at the same pace. Much was made of the government’s recent move to raise the IHT threshold to £500,000 per person and so enable spouses or civil partners to effectively gift £1m to children or grandchildren tax-free. Yet this change doesn’t fully come into effect until 2020.
Today, the IHT threshold remains frozen at £325,000 per person – with anything above that subject to a punitive 40% tax. Even those who consider themselves only moderately affluent are likely to have their estate caught by the IHT net once a house and even modest savings are taken into account.
The good news is that there are lots of strategies wealth managers and lawyers can advise you on to help, both before and after inheriting a property. Some are well known and quite simple, but others require more expertise to deploy. The key to most of them however is the same – and that is to start thinking about things sooner rather than later.
We have partnered with national law firm Weightmans to outline essential steps to take both before and after inheriting property. We hope the guide provides you with the necessary information to protect your property and pass maximum wealth on to your loved ones. Click the banner below to download the guide and if you have any questions relating to this topic please contact the findaWEALTHMANAGER.com client service team HERE.