Why you should talk to your parents about Inheritance Tax
We recognise it can be difficult to have awkward conversations with your parents. No-one likes to think, or talk, about dying but the old cliche rings true: there are only two certainties in life - death and taxes.
So it makes absolute sense to pull your head out of the sand and address this issue. Here's why:
Most people think that Inheritance Tax only applies to the super-rich - oil oligarchs and Premiership football players. However, the allowance the Government gives each individual is only £325,000 before Inheritance Tax kicks in. In many parts of the country average house prices have far outstripped this level so it's easy to unwittingly get caught out.
The tax is a whopping 40% on all the assets above the allowance levels. However, it's not actually your parents that pay this tax - it is their estate when they have passed away. What that means is it comes off any money that comes to you and your family. This should be your motivation to get them to do something about this.
Inheritance Tax is often described as a voluntary tax. This does not mean that at the time you die the Revenue asks whether you would like to pay the tax or not! However it is a voluntary tax in the sense that if you take reasonable steps in good time, the tax can be avoided.
Much has been made of the Governments "£1,000,000" residence inheritance tax allowance that has begun this year but it is important not to be complacent about this as it is subject to various limitations, most notably it only kicks in fully in 2020, the £1,000,000 only applies to couples (an individual's allowance will rise to £500,000) and it requires property to be owned at a certain value. It also disappears completely for estates above £2,700,000.
It gets worse - if you have an estate in your own right then inheriting from your parents can exacerbate your own Inheritance Tax position or create an Inheritance Tax liability that wasn't there before. This can mean that the same assets get hit for Inheritance Tax when your parents die and then again when you die. That's an 80% tax on those assets so you can see how family wealth can quickly be diluted over just a couple of generations.
At McClure Solicitors we specialise in giving Inheritance Tax advice and saving our clients very substantial sums. We provide this advice not only to our own clients but to other business including Financial Advisors, Solicitors and Estate Planners. Our solutions are not just “out of the book” but we are proven to be practical and user friendly. We also understand many clients wish to avoid Inheritance Tax and still retain control of their assets.
To find out more on Inheritance Tax visit our page here.