Estate Planning

We offer a thorough Estate Planning service to help address any potential Inheritance Tax bill. With careful planning we can help you to reduce or eliminate your potential IHT bill whilst still remaining in control of your assets.

Each individual has a tax free allowance, known as the Nil Rate Band, under which there is no inheritance tax liability.  This is currently £325,000 each.  Between spouses there is no liability to inheritance tax on first death.  On the death of the survivor both Nil Rate Bands can be used (i.e. £650,000 of assets in total).  Assets over this threshold are chargeable at 40%.  The executors of the estate are responsible for settling this tax bill.


In addition to this allowance you have the following exemptions and reliefs:


Sometimes, even if your estate is over the threshold, you can pass on assets without having to pay Inheritance Tax. Examples include:


Spouse or civil partner exemption

Your estate usually doesn't owe Inheritance Tax on anything you leave to a spouse or civil partner who has their permanent home in the UK - nor on gifts you make to them in your lifetime - even if the amount is over the threshold.


Normal out of income exemption

This exemption applies where the taxpayer can show that a gift (transfer of value) meets all three of the following conditions:

o It formed part of the transferor’s normal expenditure

o It was made out of income, and

o It left the transferor with enough income for them to maintain their normal standard of living.


Charity exemption

Any gifts you make to a 'qualifying' charity - during your lifetime or in your will - will be exempt from Inheritance Tax. A donation to charity in your will may also reduce the rate that tax is paid at (see more in the link below).


Potentially exempt transfers

If you survive for seven years after making a gift to someone, the gift is generally exempt from Inheritance Tax, no matter what the value.


Annual exemption

You can give up to £3,000 away each year, either as a single gift or as several gifts adding up to that amount - you can also use your unused allowance from the previous year but you use the current year's allowance first.


Small gift exemption

You can make small gifts of up to £250 to as many individuals as you like tax-free.


Wedding and civil partnership gifts

Gifts to someone getting married or registering a civil partnership are exempt up to a certain amount.


Business, Woodland, Heritage and Farm Relief

If the deceased owned a business, farm, woodland or National Heritage property, some relief from Inheritance Tax may be available.


Strategies for Mitigating Inheritance Tax Include:



In addition to these exemptions you can gift any amount of capital.  After the donor survives for 7 years this capital is considered as outside of the estate


Writing monies in trust

The investment vehicle used to invest monies in trust is an investment bond (also known as a life assurance bond).  This type of investment is considered a ‘non income producing’ investment and so is tax efficient to hold in trust.  An ISA cannot be written in trust and other investments, such as OEIC’s (open Ended Investment Company)- which is effectively the same investment product as an ISA just ‘without’ the ISA wrapper, are not tax efficient when held in trust.


Insuring against the liability

This strategy is generally used when you cannot completely remove the future inheritance tax liability (eg by spending, gifting or writing all of your assets into trust).

This strategy uses a Whole of Life insurance policy.  On the death of the life assured the plan pays a lump sum (sum assured) to the executors/ trustees of the estate to provide funds with which they can pay any outstanding inheritance tax liability.


Generic Types of Trust:


Gift Trust

This is the type of trust you have already set up with Standard Life for your sons.

Investing this capital and writing it under this type of trust is like giving a gift to an individual.  In that you cannot be seen to benefit from either the capital or growth.  You have for intents and purposes made an irrevocable gift.  You as trustees retain control of how the monies are invested and when they are distributed.  The capital falls out of your estate after the donor/ settlor survives for 7 years.  The growth is outside of your estate from inception.


Loan Trust

When writing monies into a Loan Trust you retain access to the capital.  As such the capital remains part of your estate.  The growth however falls outside of your estate from inception. The growth remains in the trust for the benefit of the beneficiaries names on the trust.  This type of trust is useful if you are in a position to give up any future growth on your capital, but want to retain access to your capital.

If you feel you already have sufficient assets and income to provide for your needs during your lifetimes, a Loan trust could be of value to protect the future growth on your estate.  You would effectively only be giving up access/ benefit to the future growth on your investment, whilst retaining access to the original capital.  A life assurance bond would be used as it is tax efficient to be held under trust.  It is normal to focus on investing for capital growth, but once addressing Inheritance Tax the focus should start to fall upon protecting the ongoing growth from adding to your future inheritance tax liability.

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