Planning ahead
21/08/2008
A recent test case has highlighted the potential issues surrounding inheritance tax – and has prompted local Tollers LLP solicitor Barry Rogers to urge people to consider the impact that inheritance tax may have on their estate when they die.
Joyce Burden, 90 and her sister Sybil, 82 have battled unsuccessfully for 30 years to ensure that when one of them dies, the other does not need to sell their shared home to pay an inheritance tax bill.
When civil partnerships became lawful they thought they might be able to use discrimination legislation to aid their case. Were they not related, they could have formed a civil partnership and no inheritance tax would be payable when the first sister dies – but as they are related they are not permitted to do so. They have lost their appeal in the European Court of Human Rights (ECHR).
Barry Rogers commented: “There are a number of steps individuals can take to minimise inheritance tax. For a start, assets given away more than seven years before someone dies are entirely exempt and many individuals give their assets and houses away to avoid tax entirely. There are complex rules against ‘reservation of benefit’ but with legal advice many lawful arrangements that completely avoid the tax are possible.
“For spouses there is no inheritance tax until the second spouse dies and even then that spouse has the benefit of both their and their spouse’s inheritance tax exemption band.
“Most of those who die do not pay the inheritance tax simply because they are well below the threshold – which is £312,000 for 2008 to 2009. It is only those with assets worth £312,000 or more who have to pay inheritance tax.
“Even with recent legal changes it is possible to put some assets in trust to avoid the tax. Many individuals put their life assurance policies into trust for their children and this avoids inheritance tax in most cases. In addition life policies can be taken out and put in trust and the proceeds used to pay the tax.
“Finally, it’s worth bearing in mind that inheritance tax on some assets does not have to be paid all at once – payments can be spread over 10 years.”
