It’s not unusual to want to put off thinking about the future. We can easily get used to the fact that will writing and estate planning feel like remote burdens – things that pop into our heads during a quiet moment every now and then but, when we promise ourselves that we will see to them soon, disappear again for weeks or months. 

The most important thing you can do is accept that planning for your loved ones’ futures is a lot easier than worrying about them. Sooner or later, that remote burden will turn into a real fear – a fear that their financial stability is getting beyond your control, that you have only limited opportunities to get it back on track. 

In other words, it’s about stopping that habit of complacency. Inheritance law and inheritance tax are very complicated. Sound advice tailored to your situation is incredibly important, and, as independent financial advisors, we know that better than anyone. 

There are a lot of misunderstandings and myths out there

There’s a good chance that some of the ideas and assumptions you’ve made about inheritance are incorrect. There are a lot of different rules, conditions, requirements and options for reducing inheritance tax out there and while some may apply to certain cases, others won’t. This is how misconceptions spread like wildfire in the absence of real advice. It’s understandable, but it’s also very dangerous. 

For instance, a lot of people believe that inheritance tax is only a consideration for the very wealthy to address. Others assume that if they pass ownership of their home onto a child or partner before they die, the property will not be liable for inheritance tax. 

In both instances, believing the myths poses a big risk to your surviving family’s finances. Making one of the common inheritance tax mistakes could mean that they stand to inherit far less from your estate than you assumed, that they face a far more unsettling time without you than you might have envisioned for them.  

It could cost your loved ones dearly

Many people don’t take the time to consider the true wealth their estate holds. From the value of any properties you own to investments, digital wallets, and any valuable assets, it’s not as hard as you’d think to pass the current threshold of £325,000. Consider the fact that, in spite of inflation and spiralling property value, the threshold has not changed in more than ten years. 

Inheritance tax takes a big chunk out of the money that can pass onto your family. The standard rate is 40%, which has a major impact – particularly if you weren’t expecting it to impact your estate.  

Planning takes time

There are a lot of things you can do to make your estate liable to pay less inheritance tax and ensure that more money goes to your loved ones, but they can’t all be organised in a single session with your financial advisor. It’s far better to start long in advance so that you can pass on as much of your wealth as possible. 

For instance, a lot of people know that they can make certain gifts each tax year, and most people believe that they can do so up to the value of £3,000. There’s actually a lot more scope for gifting money, whether free from inheritance tax or at a reduced rate. 

Monetary wedding gifts and ‘small gifts’ (meaning no more than £250) are also worth investigating if you want to pass on as much as possible. The catch, of course, is that you’ll need to start making these gifts as early as possible if you’re going to offset any inheritance tax taken from your estate after you die. 

The sooner you start inheritance tax planning, the better your chances are of reducing the impact inheritance tax has on your estate. 

Proper planning takes the burden off your loved ones’ shoulders 

The weeks and months after a death are some of the most stressful any of us will experience. Beyond the toll of grieving, the complications and anxieties associated with sorting through an estate and ensuring inheritance passes to the right people – and that any dependents are kept financially secure during that period – can feel almost insurmountable. 

If you made inheritance tax planning a priority and formed a longstanding relationship with your financial advisor, then your family will have someone reliable to turn to – and that can make all the difference. At Perennial Wealth, we have helped many families face that difficult period that follows a death in the family, offering clear guidance and help when life feels unfamiliar and daunting. 

Beyond the financial ramifications of inheritance tax planning, this will prove invaluable to your loved ones. Don’t underestimate the importance of having someone to navigate those choppy waters on their behalf. 

Please note: Inheritance tax planning, will writing, estate planning and trusts are not regulated by the FCA