Assured Legacies - Inheritance Tax Planning

Three Easy Steps to Become a 40% Taxpayer

Step 1: Accumulate Assets over 285,000

Step 2: Do Nothing

Step 3: Die

Inheritance Tax was once described by Dennis Healey when it was brought in to replace Death Duties as a "voluntary tax paid by people who elect to pay it by doing nothing" and by Lord Denning as "a tax paid by people who dislike the Revenue less than they dislike their own relatives"

Whilst this might seem a little flippant the fact remains that the vast majority of the 3.5 billion paid in the last fiscal year and the thousands and thousands of properties that had to be sold to meet this liability could have been protected with a little careful planning and forethought.

For single people there are a range of options that can be tailor made to suit most people's circumstances available through our associated financial advisers*.

For couples an IOU/Loan Trust which in essence allows both people to fully utilise their nil rate allowance of 285,000 and consequently gives a total tax free estate of 570,000 with an optimal tax saving of 114,000 is the most robust and cost effective method available.

In a nutshell the assets of the first person to die are earmarked for the residuary beneficiaries (normally your children) but are diverted to the survivor who writes an IOU for them to the trust. This means that the survivor is completely secure having everything in their name but when they die the IOU is repaid and the money passes directly to the residuary beneficiaries. This reduces the estate of the second person to die by the amount of the IOU and removing or at the very least dramatically reducing the tax liability.

The Financial Times Money & Business Section 24th October 2004 stated "The Capital Taxes Office is content that schemes of this type are effective as an IHT planning strategy"

In addition to the tax saving element of this scheme it has a couple of significant 'spin-off' advantages namely: Protection of half the estate from Residential Care costs and protection from 'sideways disinheritance' i.e. your estate going to a third party and not your intended beneficiaries.

* Focus Investment Planning Ltd.

N. B. All figures correct at April 2006 Budget

We at Assured Legacies Ltd would be happy to discuss this subject in greater detail with you either on the phone or in the comfort of your own home at your convenience.