Well over half (58 per cent) of investors aged over 50 who use an Independent Financial Adviser have not asked them for Inheritance Tax (IHT) advice according to new research amongst UK advisers conducted by TIME Investments, a specialist in estate planning solutions.
This is despite the fact that receipts from IHT in the UK are set to increase from the record GBP5.4 billion in 2018/19, to GBP6.9 billion in 2023/24 – an increase of GBP1.5 billion over the next five years – according to Government forecasts.
The survey showed that, according to advisers, there are several barriers to investors seeking advice around their IHT planning. Over half (57 per cent) cited poor understanding due to the complexity of IHT. Uncertainty over how much money is required to provide for the rest of their life (46 per cent) was also a concern for many. A reluctance to discuss death (44 per cent), the perceived cost of advice (31 per cent) and negative perceptions around some tax planning vehicles (28 per cent) were also stated as reasons to avoid planning
Henny Dovland, TIME Investments’ IHT expert, says: “Estate planning and wealth transfer should be seen as a positive step in helping younger generations, rather than something that is difficult to talk about. Our research shows there is a real opportunity for advisers to educate and inform their clients about the benefits of effective tax planning.”
Bharat Chudasama from Tudor Franklin says: “IHT planning is a notoriously complex area and one where quality advice and appropriate investment solutions can make a real difference. We encourage all of our clients to think about wealth transfer sooner rather than later as part of their savings and investments planning.”
Henny sets out the following areas to think about when considering intergenerational financial planning:
• Think about how much income is required in retirement and how long this income needs to last.
• Where there are surplus assets, IHT planning should be considered. There are several tax efficient ways to pass assets to descendants, but these have different constraints and obligations.
• The easiest route may be to pass cash to family members. However, aside from the use of small and annual gift allowances, larger gifts will typically take seven years to fully fall outside of the taxable estate. It also means those doing the giving lose total control of the money.
• A more complex option, but with greater constraints on the recipients, is to set up a trust which is exempt from IHT. However, as with gifting, once the assets are in the trust the individual loses control.
• An alternative tax efficient option is investing in shares that qualify for Business Relief (BR) which can offer 100 per cent IHT relief in just two years.
