Attendees at the Association’s recent Residential Forum were given an insight into how families could minimise the amount taken by the Government’s ‘death tax’ as a property passes through the generations.
Speaking at the NAEA Forum, John Varley, chief executive of estate planning company Money Marketplace, advised attendees on the steps they could take: “Planning to avoid inheritance tax is a relatively straightforward process, which involves the use of some simple legal documentation. Everyone is allowed to pass on up to £285,000 before being subject to the 40 per cent tax. In a typical family, when one parent dies all their assets are passed to the remaining spouse; their tax free allowance, however, is not. This means that when the second parent dies they are effectively passing on two people’s assets but only using one person’s inheritance tax allowance. By putting the correct legal documents in place the family can ensure that both parents’ allowances are utilised when the second parent passes away. The outcome being that a typical family can save up to £114,000 in potential inheritance tax and in such a way that their own position during their lifetime is not at all compromised.
“Inheritance tax is no longer a ‘rich man’s tax’; it now affects around six million homeowners across the UK. If people only plan to make the most of both of their 'Tax Free' allowances then the overall amount of inheritance tax paid can be significantly reduced and for the vast majority of those affected it can be removed altogether.”
Charles Smailes, president of the NAEA, commented: “More and more people are falling victim to inheritance tax as rising property prices far outstrip the tax threshold rises. There has been an astonishing 72 per cent increase in estates paying inheritance tax in the last five years and the Government itself predicts this to increase by a further 22 per cent by the end of the current tax year.
“It is important for people to feel secure in the knowledge that everything they have worked hard for over the years will be safely passed on to their children. Careful planning is the only way to do this.”
