Estate Tax Review

Estate Tax Review are Independent Financial Advisers and Estate Tax specialists dedicated to helping people who are looking to reduce their estate tax (also known as 'Inheritance Tax') liability where possible.

Our team are based all over the UK and have recently received awards including the Money Marketing Inheritance Tax Planner of the Year 2010. We host Estate Tax seminars to help clients review their potential tax bill and provide solutions which look to avoid paying more tax than necessary.

When considering estate tax planning various factors should be taken into account. If a strategy is incorrect or illegal then your estate may be liable to a large tax bill so it is very important to make sure you take appropriate advice from an independent and qualified company.

Estate Tax Review are independent advisers who work for a Chartered financial advice company called AISA Professional, regulated by the FSA.

Who pays Estate tax and when is it due?

Estate tax is charged if an estate is valued over your 'nil rate band' (currently set at £325,000 until 2014), including all assets such as property, investments and gifts / trusts set up seven years before the settlor passes away. The tax is charged at 40% on the value over this £325,000 threshold. So as an example, if someone dies with an estate of £1,000,000 then there would be a £270,000 tax bill due within 6 months of passing away (£1,000,000 minus current nil rate band of £325,000 is £675,000 taxed at 40% is £270,000). If the majority of this £1,000,000 is a property then this may need to be sold in order to pay this tax bill. This could cause considerable problems and upset if the property is a family home which has been passed down through generations.

Rules introduced in 2007 now mean that married couples and civil partners can use both of their nil rate bands on second death. This means that they are assessed on estate tax liability with a joint nil rate band of £650,000, after both partners have passed away. Their personal representatives or executors would transfer the first spouse's Inheritance Tax threshold to the second spouse when they die. If a spouse has died previously but did not use any nil rate band to transfer assets then on second death there would be a joint nil rate band available.

Estate Tax is paid by either the executor or personal representatives of the deceased and using funds from their estate. If assets are in, or transferred into, a trust then the trustees are usually responsible for paying any estate Tax due. If a gift had been made in the past seven years before death then the value of this gift would potentially form part of the estate, depending on when the gift was made and subject to a 'taper relief'.

What methods of Estate Tax mitigation are available?

Various Inheritance planning solutions should be considered when looking to reduce your liability to Estate Tax, but peoples requirements often differ so one strategy does not fit all circumstances. The main issues to review would be the value of your overall estate, age of both partners, access to capital, need for immediate income and future income requirements. You should seek professional advice to ensure the correct solution is implemented.

Some of the options which could be considered are as follows:

- Placing a gift in trust for the benefit of children or grandchildren. This would mean giving up access to the capital and income and would not be completely outside your estate for 7 years.

- Using a loan Trust would allow access to the original capital and place only the future growth on the investment outside your estate.

- A gift and loan trust arrangement where a small gift is made of £10 and then you loan the trustees a much larger sum. This arrangement is appropriate if you want to take a regular income.

- Discounted gift and income bond. With this arrangement you take out a life assurance bond which you gift into trust. You retain a regular fixed income and an assessment is made as to the income you should receive. This figure is based on your assumed life expectancy and a 'discount' is offered so that you would see a reduced Estate Tax liability if you were to die in the first seven years after setting up the plan.

- Maturing policies in trust is a collection of investment bonds which mature on different dates. They allow you to gift money into trust for your chosen beneficiaries whilst retaining the right to periodic maturity proceeds, for example you would be offered 10% of the original investment each year. Should you not require the maturity proceeds (the 'income') then your trustees can extend the maturity date. The investment is considered outside your estate after seven years, and any investment growth is outside your estate from day one.

- Some people look to use Business Property Relief to place assets outside their estate after just 2 years. It is possible to use a low risk structure which would allow access to the capital if needed and the money would not have to be placed in Trust for the benefit of somebody else.

These estate tax planning solutions are just a number of examples of the options which should be considered and a combination of these may form the best strategy.

One area which should not be overlooked is the importance of making a Will. This will look to ensure your wishes are followed after you pass away and can avoid complications and arguments.

Estate tax planning should be considered sooner rather than later because in many cases the strategy needs a few years before it will achieve its objectives. Spending some time with a professional to assess your options could give your family a better chance of reducing their tax bill.

How can the Estate Tax Review team help?

Our team of Independent Financial Advisers specialise in Estate Tax solutions. Their aim is to assist clients to review their liability to estate tax and recommend the most appropriate strategy dependent on their requirements. All advice is compliant with UK legislation and regulated by the FSA.

To speak to one of our professionals please contact Estate Tax Review.

Estate Tax Review offer an initial consultation phone call with an Independent Financial Adviser to discuss your situation.