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You can make inheritance tax plans now

Inheritance tax was top of the political agenda earlier this year, but has waned in significance in the face of the global financial crisis. But with almost all GPs above the threshold, it can't be ignored, advises Justine Roberts of Pulse Financial Consultants

Inheritance tax was top of the political agenda earlier this year, but has waned in significance in the face of the global financial crisis. But with almost all GPs above the threshold, it can't be ignored, advises Justine Roberts of Pulse Financial Consultants



An area of planning we have had queries about this week is inheritance tax planning, so we though we'd bring it back into focus. Not so many months ago inheritance tax was at the top of the political agenda and all over the press, with both Labour and the Tories vying for political brownie points.

Since then it has all gone quiet and the issue has been overtaken by more pressing matters of global financial meltdown and falling equity and property values.

The recent changes that Labour instigated, coupled with the fall in property and equity values, have had some impact on people's liabilities, however most GPs are still likely to suffer a significant liability on death.

Currently the inheritance tax threshold is £312,000 per individual. The changes mean that those who are married or in civil partnerships are able to pass the unused proportion of their allowance to their partners if they die first.

Interestingly this has always been possible via the use of a discretionary will trust, which many people will already have in place. The change has simplified the process but not increased any of the allowances.

When we factor in the "true" worth of people when they die, the allowance is not that significant. Adding NHS death in service benefits, fund values from private pensions and life cover to investments and property, and most GPs are then over the allowance. There is no liability between spouses; however transfers over this threshold to any other beneficiary are taxable at 40%.
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Many people take the view that an inheritance tax liability due after they die is not their concern, as beneficiaries are going to inherit a significant sum anyway and inheriting a little less may not be a problem. There are issues with this approach. Inheritance tax is payable "before" probate will be granted, meaning that the liability has to be paid prior to any money being released.

An estate of £1.5 million would lead to an inheritance tax liability of £350,400, a significant sum for the beneficiaries to finance when no assets from the estate have been released. Also when you have worked so hard all our lives accumulating assets do you really want to give significant sums to the government in the form of tax when it can be passed onto beneficiaries of your choice or charities?

One of the major issues with inheritance tax planning is timing. Much inheritance tax planning is complex, utilising trusts to take assets or the growth in assets outside of an estate. Although effective it is generally not practical to put plans of this type in place until after retirement.

Many GPs are therefore in a difficult position, having significant inheritance tax liabilities whilst at the same time not being in a position to undertake some of the more complex forms of mitigation. There are a number of simple measures that can be put in place to ensure that on death an individual's or couple's estate is no greater than necessary.
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Life insurance, death in service benefits and pension scheme lump sums can all be paid outside of the estate on death. It is simple to do and there are no expensive solicitor's fees to pay. Ensuring as a minimum that these simple measures are done can save tens or possibly hundreds of thousands of pounds in inheritance tax.

This is a huge topic and we have only touched on this briefly. It is a complex area of planning, so if you would like to discuss your situation or the options open to you please contact us.

Justine Roberts, Pulse Financial Consultants Justine Roberts, Pulse Financial Consultants Top cash ISAs Mortgage rates Contact Medical & Financial

Medical & Financial can be contacted by email at enquiries@medicalandfinancial.com

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