Thinking about death can be an emotional subject. But if there’s any silver lining, it’s the positive impact passing your estate on can have. For example, you might be able to support family financially, or help a grandchild get a foot on the property ladder.
Having conversations around what you want your estate to achieve can go a long way. And thinking about this earlier rather than later can be especially beneficial. Doing so may allow more opportunity to make better use of tax allowances, or for you to see loved ones enjoying what you’ve given them in person.
Effective planning can be complicated though, and covers a broad range of topics. We can provide made-to-measure recommendations that helps click everything into place, whilst supporting your needs and goals. Here’s what we can help with.
Inheritance Tax
Inheritance Tax – typically the 40% tax you pay on your estate on anything above £325,000 – can play a big role in inheritance planning. This is set to remain fixed until 6 April 2028, but could change in the future. Inheritance Tax can be complex because of certain exemptions and additional limits that come into play depending on who you leave your estate to, amongst other things.
Because of this, financial advice can be invaluable in getting things right for your individual circumstances. Our experts can help you minimise how much should be paid, meaning those set to inherit your estate aren’t left with a surprise. Considering the latest figures from the government show the average Inheritance Tax bill in 2020/21 was £214,000, it's an area deserving of careful attention.
Gifting
Gifting is the tax term given to passing money to people or causes you care about whilst still alive. It can be a smart way to minimise Inheritance Tax, and allows you to see first-hand the benefits it provides to whoever receives it. The timing of a gift is important, as the longer you live after making it, the less tax there is to pay. Live for seven years afterwards, and your gift usually wouldn’t be taxed at all. So being proactive can pay off. Like Inheritance Tax though, there’s more to be aware of when gifting, including tax-free allowances and exemptions. We can help set up a tax-savvy gifting structure that suits you and those set to receive it.
Tax rules can change and the impact of taxation and any tax relief depends on your circumstances, including where you live.
Trusts
Trusts are a powerful option that can support what you'd like your money to go towards. Knowing your money will be used for a specific reason after your death can feel reassuring. This could be university fees or even covering off an Inheritance Tax bill. Think of a trust like a vault where you can safely store money and other assets for whoever you choose to receive them. Trustees – the guardians of the vault – can access it and pay out whatever’s inside when the time comes.
There are different types of trust with varying tax rules, but what they all have in common is the element of control they give you. They can also be very tax-efficient – anything you put into a trust will fall out with your estate if you live for 7 years after. This can help reduce the overall value of your estate, meaning you could pay less Inheritance Tax. We can help decide if a trust is right for you, and if so, set everything up so you don’t have to.
Any gifts into a trust can't be used for your benefit. You won't have access to the money yourself, so you need to be sure you can afford to make them.
How we can help
Inheritance planning is often a balancing act between gifting money and the amount you need to maintain life now, as well as in the future. We’ll use projections to allow you to see how this could potentially look, and how chopping and changing things could free up more money for those you care about.
It’s a complicated subject – there’s lots to consider, and how you approach one area will have a knock-on effect in another. We can help take the headache out of things, advising what the best approach for you is. We’ll consider Inheritance Tax alongside your wider situation to ensure you’re paying the least amount possible.
Whilst we can’t set up wills, we can recommend lawyers who can. We’ll also review how your wider estate fits alongside your will. For example, pensions usually aren’t covered by wills, so we’ll talk you through what needs to be considered. It can help you feel more confident knowing an expert as reviewed things in their entirety.
Want to know more?
"M&G Wealth Advice” is a trading name of M&G Wealth Advice Limited which is registered in England and Wales. Registered office at 10 Fenchurch Avenue, London EC3M 5AG. Registered number 5739054. Authorised and regulated by the Financial Conduct Authority.