Lack of IHT planning costs families £4.9bn

Last year, HMRC collected a record-breaking £4.9bn from IHT, and research from TIME Investments revealed that 36% of consumers aged 55 and over that seek financial advice from an IFA have not considered IHT planning, despite IHT taking 40% of a total qualifying estate.

TIME Investments IHT expert Henny Dovland commented: “Financial planning needs to be done on an intergenerational rather than individual basis. Instead of considering bequeathing assets to children alone, it is worth considering how grandchildren and great grandchildren can benefit. It is an area where expert advice from a financial adviser is needed.”

As a way to combat this and ensure that you are getting the most out of your inheritance, Dovland suggested “considering intergenerational financial planning".

This involves thinking about how much income is required in retirement and how long this income needs to last. Once this has been established, financial advisers then need to find out whether that income target can be reached based on an assessment of available assets.

When there are surplus assets, IHT needs planning needs to be considered. Trusts can be setup that are exempt from IHT, however, once the assets are in the trust the individual loses control of them.

In relation to property, the nil rate band remains at £325,000, meaning that estates exceeding that worth could be liable for IHT. However, the government has introduced the Residence Nil Rate Band (RNRB) from April 2017, which grants homeowners a further £100,000 before being subject to IHT. This is further set to increase annually by £25,000 until 2020.

“We all know the saying ‘you can’t take it with you’ but the pot still needs to last until the end. Intergenerational planning is about striking a balance between providing for each of the individuals with the right tax efficient income to cover different needs at various stages of their life. The right advice at the optimum time is crucial in ensuring each generation can share in the family’s wealth both today and in the future,” Henny concluded.

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