Wills, trusts & probate articles

What to do when a loved one dies
25 June 2010

Budget Summary 2010 | How it will affect you
23 June 2010

Contested probate claims
20 May 2010

What to do when a loved one dies | The Probate process
15 April 2010

Budget Summary 2010 | For private individuals
26 March 2010

In sickness and in health
3 March 2010

Take steps now to avoid hefty inheritance tax bills

20 April 2009



Recent headlines about whether the Conservatives remain committed to abolishing inheritance tax on estates worth less than £1 million have once more raised the issue of the need to plan for the future.

Currently inheritance tax is levied at 40% on any amount of money inherited over £325,000 – £650,000 for married couples if they make use of the transferable nature of the nil rate band – but the Tories have pledged to increase the figure and make sure “only millionaires” pay.

However, with Home Counties’ house prices among the highest in the country, many local families will still find themselves liable for inheritance tax if they don’t take steps to plan ahead.

Jane Northway, a senior associate solicitor at Thames Valley law firm B P Collins, says making a will and looking at options such as setting up Trusts for younger family members is essential.

She views the £1 million plan with some cynicism, not least because it would dramatically reduce the amount of money due to the government, and comes at a time when HMRC seems determined to make every penny count.

“Over the next 10-20 years, baby boomers who’ve known more boom than bust will die and it’s likely that, unless they take avoiding action in the meantime, a considerable amount of inheritance tax will be due on their estates,” she said.

The practice has a specialist team of lawyers who are experts in family estate planning and in recent months has seen a large rise in the number of clients wanting advice on how best to avoid too many nasty tax surprises.

“We offer families a complete family estate planning exercise, which looks not just at the immediate generation and inheritance tax, but provides advice for younger generations too,” added Jane.

“There has been a huge increase in people who want to set up Trusts, not just to tackle the issue of inheritance tax, but also to deal with individuals' concerns about bankruptcy or divorce proceedings. People are looking to Trusts to provide them with added protection for their funds and that’s where we can help.”

With many people now living longer, setting up a Trust can also allow monies to effectively “skip” a generation, something which is an increasingly popular option for sons and daughters who are themselves in their 50s or 60s and already comfortably off with their own money.

“Looking at several generations of a family as a whole means we can help them understand the best scenario for their particular circumstances and make sure we help the tax position of any grandchildren as well as the immediate sons or daughters,” said Jane.

This is especially important, she says, for estates worth in excess of £1.5 million where future generations can really benefit from the Trust option.

Even for smaller financial estates however, she stresses the importance of proper planning and, at the very least, making a will with a solicitor.

She added: “People assume that under intestacy rules everything will pass to a surviving spouse, but that’s a common misconception. A problem we often encounter with older couples is that the property may be in the sole name of one person, usually the husband, and this makes it much more complicated if no will has been made.”

Earlier this year, a report revealed that as many as one in four deaths now sparks a bitter row between family or friends over the inheritance of the deceased.

The unequal distribution of money, personal possessions and property are the reasons behind most disputes, with three in ten fearing they will be squeezed out by family members following a relative's death, a quarter saying they were worried they would end up with nothing and one in five concerned they would not be treated fairly.

“We’re certainly seeing a rise in the number of disputes over estates. This may be due in part to the changing economic climate but more generally we seem to be more prepared to challenge someone’s wishes and to pursue monies through the court route,” said Jane. “This can be very time-consuming and expensive and it’s also something that can be avoided if the right planning is put in place.

“Our main message to people has to be, make a will. Not only can it go some way to mitigating any inheritance tax which may be due, but it is also the best way to make sure an individual’s wishes are carried out in accordance with what they wanted to do.”

If you would like to speak to one of B P Collins' private client experts, please call 01753 279045 or email privateclient@bpcollins.co.uk.