Common misconceptions about Inheritance Tax Planning

Posted by: Nicola Macdonald, on November 3, 2015.

One of our most enjoyable outcomes when helping couples or individuals is reducing their current Inheritance Tax liability. This is because we are helping them to increase what is ultimately passed to their chosen beneficiaries, whilst also recognising they don’t want any compromise to their current financial security and independence.

But it’s fair to say that there are some common barriers we encounter to Inheritance Tax planning. Perhaps one or more is familiar to you:

  1. You still require access and control of your funds
  2. Health – You are not keen on GP medicals or some form of medical underwriting
  3. Complexity – It’s not easy to understand what is being proposed
  4. Risk – There is a perception that either the underlying investments to be used are too risky or that the actual IHT strategy itself may be risky and attacked by HMRC

A simple and long standing alternative that overcomes all of these common problems is known as a Flexible Reversionary Trust. In brief, this can provide the following benefits;

  • Access can be retained to your funds
  • Any growth on funds placed into Trust is immediately outside the estate, which means less Inheritance Tax and more passing to your beneficiaries
  • A simple “conveyor belt” of annual maturities can be created on a totally bespoke basis, this means that you can plan when and how you withdraw funds
  • As with simple gifts, the original amount placed into Trust falls outside your estate after 7 years, so the sooner you start this 7 year clock running the better

Take a look at this short 3 minute video.  It explains all of the above in a little more detail.


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