This is the tax which larger estates pay on death at the eye watering rate of 40%. We have now written hundreds, nay into the thousands of Wills and been acting for estates for over twenty years now and have handled many Probate cases and Trusts but after the sad death of a client, we are soon to pay what is our biggest ever cheque to HM Revenue and Customs.
We had guided the individual but he was single and didn’t feel the pressing need to take actions to mitigate what tax was applicable for the benefit of more distant beneficiaries (one family whose lives will be transformed as a consequence of his generosity, with a seven figure inheritance and they’ll have to learn how to manage a considerable financial pot). Ideally, the investments we managed for the individual can simply be reregistered into the beneficiaries’ names with no costs of sales and repurchase, etc (which can be worth up to 10%) and we can manage the values for IHT should they vary favourably over the year from death and if selling any for less, then an IHT rebate can be claimed, so effectively you can cherry-pick and keep the ones which have risen!
Still, we did introduce several qualifying business assets (shares in quoted companies which were pretty good for him anyway) and that £108,000’s worth is saving £43,200 of tax and he only needed to have owned these for two years to qualify. (Do you own any? We manage such portfolios and effectively, you can save 40% of all the investment and it is still yours, in your name). We also guide on philanthropy and charity legacies which save IHT (such legacies are exempt from tax and also giving IHT savings on the rest of the estate too). For the case in question, we are likely to encourage the beneficiary to complete a ‘Deed of Variation’ too to allow some of the legacy to bypass them in favour of others, thereby reducing their own subsequent problems! It’s all part of the service.
Of course, there are also many other opportunities to reduce and sometimes eliminate altogether this type of liability on death. This does not need to involve complicated and expensive Trusts nor dubious offshore tax havens. Instead it can be very straightforward and legal to save your beneficiaries hundreds of thousands of pounds in tax which would otherwise make HM Revenue and Customs one of the biggest beneficiaries of your estate!