Fool me once – shame on you, fool me twice – shame on me!

In April 17, 2015
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Election

There has been an increasing amount of attention devoted to inheritance tax (IHT) rules in the run-up to May’s General Election. So let’s cut through the pre-election noise to outline why clients should still take their estate planning seriously!

What’s being said?

The Conservative Party’s General Election manifesto has confirmed plans to “take the family home out of inheritance tax”, should they win a majority. The Labour Party hasn’t made any reference to changing IHT legislation in its manifesto and it doesn’t look like this is high on the agenda for the other political parties either.

Under the current system, and assuming no other assets are held in an estate, family homes worth more than the nil rate band of £325,000 may be liable to an IHT bill of 40% on the excess. But proposals from the Conservatives would introduce a new family home nil rate band worth an extra £175,000 per person, or £350,000 per couple. This would give married couples an effective combined nil rate band of up to £1 million, with £350,000 of this reserved specifically for use against the family home.

Who is fooling who?

Rising house prices have left more people burdened by inheritance tax, so if there is any truth in the promises we have been given by the Conservatives, it would be welcomed by many.

However, it’s worth noting that manifesto pledges don’t necessarily become law, as we saw with a similar pre-Election promise made in 2010! If the Conservatives don’t get a majority win in May and we are faced with another coalition Government, it is unlikely they will be able to deliver on their promises of a £1 million inheritance tax allowance. So are they fooling themselves or us as voters?

The danger really comes from voters putting off their estate planning in the belief that this proposal will actually come to fruition! Under the Conservative’s own timetable, if they win, the new nil rate band wouldn’t be introduced until April 2017, and a lot can happen in two years! So delaying your planning could have disastrous impacts.

With the right type of planning inheritance tax continues to be a completely voluntarily tax which can be easily and legally mitigated for clients, so don’t depend on politicians making changes to the tax regime. Take professional advice and put your own planning in place to resolve the problem.

Politician’s still don’t get it…

Even if the Conservatives secure a majority win and are finally able to implement the new inheritance tax threshold, this still won’t stop families needing to implement true estate planning. If politician’s bothered to find out what REALLY matters to most people, they would know that for many clients, inheritance tax normally ranks as the third reason for implemented any trusts and estate planning, ahead of this reason is firstly direction and  secondly protection!

Direction is about making sure the right money, goes to the right people, at the right time and protection is about making sure our hard earned wealth stays within the family bloodline and is not lost by our children on divorce, bankruptcy or going into care. Often these two reasons rank far higher on the list of priorities than mitigating the inheritance tax bill and unfortunately the Conservatives proposals will do nothing to help clients with these concerns.

But at least inheritance tax reduction is on the Conservatives agenda, which is more than can be said for the other parties!

 

Your capital is at risk. Investments can fluctuate in value and investors may not get the amount back they invest. Tax rules can change at any time.

 

Please remember your home or property may be repossessed if you do not keep up repayments on your mortgage. We give clients the option to pay for mortgage advice by fee rather than commission. Equity Release refers to lifetime mortgages. To understand the features and risks, ask for a personalised illustration.

 

The Financial Conduct Authority do not regulate, Will Writing, Buy to Let Mortgages, Auto Enrolment, Tax Advice and Estate Planning.

 

The opinions contained within this blog, do not constitute financial advice and no action should be taken based on this content alone.

Jasmine has been a qualified Financial Planner since 2008. She has also been a member of the Society of Will Writers since 2012. She is passionate about helping Clients build their wealth and achieve the financial lifestyle they desire. Her areas of expertise are that of Savings, Investments, Pensions and Retirement Planning.

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The Financial Conduct Authority do not regulate, Will Writing, Buy to Let Mortgages, Auto-Enrolment, Tax Advice and Estate Planning. Your capital is at risk. Investments can fluctuate in value and investors may not get the amount back they invest. The guidance and/or advice contained within the website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK. https://register.fca.org.uk/

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