Estate Planning

Estate planning involves tax, but it encompasses much more. As with most tax planning, the key is to know what you want to achieve – who should benefit after your death and what they should receive, but also who you might want to make gifts to now and in what form.

Inheritance tax is likely to become the main issue. Inheritance tax (IHT) is a tax payable on the worldwide assets of any UK domiciled individual on their death. Your assets include the home and any other property and your savings and investments, to name just a few. And for many the rapid rise in house prices over recent years means that IHT is no longer a tax for only the rich. But, with effective tax planning you can mitigate your liability to this tax.

There is currently a 40% tax charge levied on the value of all estates above the IHT threshold. For the tax year 2009/10 the threshold is £325,000 for individuals or £650,000 for married couples and civil partners.

But you cannot afford to ignore the impact of other taxes such as capital gains tax, stamp duty and income tax in this context. Most business assets escape the inheritance tax net under the current rules, but private homes, investment properties as well as stocks, shares and cash are generally taxable regardless of where they are situated. As your circumstances and the tax rules change, it is important to keep your estate planning under review. The earlier you start planning, the easier it may be to achieve your objectives.

Levels, bases of and reliefs from taxation may be subject to change. The Financial Services Authority does not regulate taxation and trust advice.