There seems to be a disparity between people wanting to pass their wealth onto their children through a will and the number of people who have actually written one. But failing to draw up a will means that not only will your family struggle to ensure your assets are passed the way you wished, but not having a thorough estate plan means your family could be hit with some serious Inheritance Tax upon the receipt of whatever was passed down.
This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice.
Avoid unnecessary IHT
Keep in mind that anything that isn’t exempt, will be subject to IHT. Inheritance tax must be paid on your estate (money, possessions, and your share of any property) when you die, which will then reduce how much will pass down to your beneficiaries. For the current tax year, 2022/23, the starting point for IHT is £325,000, so if your estate exceeds that amount, anything that isn’t exempt will be taxed at 40%.
It’s important to plan ahead and keep your estate plan up to date because you never know what can happen even after you’ve locked in your plan. Recently, house prices have skyrocketed. If you aren’t aware or don’t adjust your estate plan to accommodate your potentially increased home price, then your beneficiaries could be hit with an unexpected IHT bill.
Not just for the rich
While most affluent people — those with assets amounting between £100,000 and £500,000, not including property — will most likely already have their affairs in order, having an estate plan is not just for the super-rich, it’s for everyone.
There are a number of things you can do to prepare your estate plan. Of course, you can lay out all your wishes in a will, but ensure you’re working with a financial adviser as you do. They can help you decide the best way to ensure your assets are distributed the way you want — either through trusts, investments, or even pension funds.
Need help figuring out how to pass on your estate efficiently?
If you’re finding it hard building an estate plan, the good news is that you don’t have to go it alone. Tax rules are complicated, always changing, and will be different for everyone’s individual circumstances. Consulting a professional financial adviser will help ensure you’ve prepared the best plan to pass your wealth on to your family. For more information or to get started on your plan, get in touch with us.