Estate Planning Background

Inheritance Tax (IHT) is a tax charge levied on death. The rate of tax (typically 40%) is applied to your ‘estate’, should it exceed available allowances (Nil Rate Band and Residence Nil Rate Band). Valuing the estate for IHT purposes can be complicated, as certain assets and allowances can be deducted, and certain previously held assets need to be included. Advice should be sought if uncertainty exists.

The estate of the deceased is settled under the terms set out in the deceased person’s Will, or if no Will exists under the laws of intestacy. If completed under a Will, nominated Executors settle the estate via Probate, and Inheritance Tax submissions are made directly with HM Revenue and Customs. Any IHT due must be paid by the Executors within six months of the end of the month in which the individual died.

IHT Allowances

The ‘Nil Rate Band’ refers to the part of the deceased person’s estate that is exempt from Inheritance Tax. At present, this is the first £325,000 of the estate – having not increased since 2009. If the Nil Rate Band is not used in full, any remaining element can be transferred to a surviving spouse or civil partner.

The RNRB is an additional allowance that is available to those that pass their home to a direct descendant. This applies to the family home only – Buy to let properties are disregarded.

This allowance provides a further £175,000 per person if the estate is valued at less than £2,000,000. If the estate exceeds this maximum level, the RNRB is reduced by £1 for every £2 above. Therefore, an estate of £2,350,000 will not be able to apply for the RNRB.

A gift of assets or capital can impact the value of the estate, depending upon who the recipient is and how the gift has been made.

  • Gifts to a spouse or civil partner are exempt from IHT.
  • Every person has an annual gift allowance, up to £3,000 per annum. If unused, this allowance can be carried forward by one year.
  • You can make gifts of £250 per year to as many people as you wish, however, this allowance is not available if gifting more than £250 to any one person.
  • You can make gifts out of excess income. This can be a very effective allowance, however, the assessment of ‘excess’ and definition of ‘income’ needs careful
    consideration. Again, if any uncertainty exists, advice should be sought.
  • Gifts to Charities and certain institutions (for example, universities, museums, and political parties) are free from Inheritance Tax. If at least 10% of the estate is given to charity, it is possible to reduce the rate of IHT from 40% to 36%.
  • Gifts that are outside of these allowances may also be tax advantageous. The rules surrounding these Potentially Exempt Transfers (PETs) and Chargeable Lifetime Transfers (CLTs) can be complicated, with considerations around Gifts with Reservation and Pre-owned Assets Tax being of particular relevance. Professional advice should be sought in such instances.


Estate Planning and Trusts

Trusts are separate legal entities that are established to hold assets for the benefit of others (the Beneficiaries). The person that establishes the Trust (the Settlor) appoints Trustees to manage the Trust on their behalf. By putting assets into a Trust, they are no longer included within the Settlor’s for Inheritance Tax purposes, provided certain conditions are met.

The Beneficiaries of a Trust can either be specifically named within the Trust deed (these Trusts are commonly known as Absolute or Bare Trusts), or the Trust deed can give the Trustees control over who eventually benefits from the Trust’s assets (these Trusts are typically known as Discretionary Trusts).

The tax rules surrounding Trusts can be very complicated, with many pitfalls that have severe consequences. Seeking professional advice is an important element when establishing and maintaining Trusts.

Estate Planning Activities

The term Estate Planning describes the financial planning exercises that are undertaken when a person looks to optimise their Inheritance Tax situation. Typically, this involves minimising their exposure, factoring in the relevant legislation, regulation, and tax rules.

Further, the exercise should not detrimentally impact the person’s standard of living within their lifetime.  There can be many elements to effective estate planning, including:

It is important to ensure an up-to-date Will is in place that accurately reflects the person’s intentions. Without a valid Will, the estate may be distributed according to the laws of intestacy. A good Will should aim to simplify the situation, with the involvement of greater complexity only if there are clear and quantified benefits. It is also worth considering how a person’s financial affairs will be managed if they lack the capacity to do so themselves in the future. This can be overcome by establishing Lasting Power of Attorney.

Gifting and the utilisation of available gift-related allowances. Careful consideration is needed to ensure any gifts do not fall foul of the relevant restrictions, resulting in unnecessary tax costs. Again, this should be done to ensure the actions do not impact the person’s financial stability throughout their lifetime.

With pensions typically not forming part of a person’s estate for Inheritance Tax purposes, there can be significant tax savings when utilising pensions as part of your estate planning. This should include accurately documenting the beneficiaries of a pension via an expression of wish.

Life assurance and Whole of Life cover held in Trust can be a cost-effective method of meeting Inheritance Tax costs. This allows the estate to pass assets to Beneficiaries without the need to sell property or chattels within the deceased person’s estate, with the insurance pay out bypass the probate process and making capital available more promptly.

Tax-efficient investments that utilise potentially advantageous structures and products. For example, certain types of investments may qualify for Business Property Relief, rendering them exempt from Inheritance Tax if held for two years. Such investments are typically more complex and should not be considered without specialist investment advice.

Establishing tax-efficient Trusts, structured to meet the specific requirements set. Consideration should be given to the Trust’s own tax charges and costs, in life and upon death.

Planning to utilise available allowances, including the Nil Rate Band (NRB) and Residence Nil Rate Band (RNRB), plus understand when any of the available allowances are tapered.


Estate Planning Advice

With the political and taxation landscape constantly evolving, it is important to regularly review any estate planning put in place. If ignored, there is the risk of previously effective planning becoming either less effective, or in some instances result in unintended complexity and liability.

Regardless of the situation you face, seeking independent advice can provide tangible benefits, minimising the Inheritance Tax you pay, and increasing the legacy available for your loved ones.

Walpole Financial Management provide specialist Estate Planning advice, helping you to assess your potential exposure and proposing specific actions to best optimise your estate planning position.

With the highest level of qualification, over 100 years of collective experience and with expert knowledge of how to construct effective plans, Walpole Financial Management are best positioned to help you achieve your Estate Planning requirements.

Estate Planning Advice and Guidance

Estate planning is one of the most important steps to take during your life to protect your wealth for your family and loved ones after your death.

Having estate planning in place gives you immense peace of mind over what happens to your assets and property after you are deceased.

Good estate planning is designed to prevent probate, save on estate taxes, protect assets if at any point you are moved into a nursing home, and give in-charge to an individual to look after you if you become disabled.

Walpole Finance Management holds over 100 years of collective experience in providing financial advice for passing on inheritance and managing an Inheritance Tax bill.

Our team of qualified and expert estate planning advisors ensures you get all the required support you need in your planning. Whether you want comprehensive planning support or prefer having personalised advice to build your own plan, our professional services are there for your help.

Inheritance Tax Planning

As a beneficiary if you have inherited a property and assets and its value is above the inheritance tax threshold, you have to pay inheritance tax. The amount of inheritance tax can be hefty enough to cut the majority of your share.

However, there are some actions the property owner or the giver can take before dying to help reduce the likelihood of the thresholds being exceeded. It is called inheritance tax planning.

Walpole Finance Management has a specialist team of estate planning advisors having deep knowledge of the inheritance tax planning earned after years of practice.

Hence, they can offer you legally correct advice that would enable you to strategically manage your wealth to minimise your beneficiaries’ tax liabilities to some extent and maximise the amount of their gain. Speak to our experts to explore your options.

Personalised Inheritance Tax Planning Strategy

One size doesn’t fit all when it comes to inheritance tax planning. The value of property and assets is directly proportionate to the tax. Hence, you need fully-rounded advice.

Walpole Finance Management works more than simply a financial advice company. Our financial advice encompasses a range of tactics involving professional advice on finance, tax, estate planning, and inheritance legalities.

Hence, we can provide access to all the guidance you need to ensure the inheritance you leave behind is safeguarded and maximised. For this, our expert advisers work closely with you to develop a personalised Inheritance Tax Planning strategy.

Here is how they help in building personalised strategy:

  • Plan and review the provisions in the will.
  • Utilise available exemptions and reliefs
  • Determine the amount of inheritance tax you may have to pay.
  • Use lower tax rates to get the most out of lifetime transfers between family members.
  • Offer advice on transfers of agricultural or business property.
  • Offer advice on transfers of assets into the right.
  • Provide a detailed explanation on how your inheritance tax relates to other taxes.

Strategic Estate Planning Services

Walpole Finance Management understands the importance of having a strategically designed estate plan to meet your long-term financial goals. Hence, our expert advisors consider every possible aspect of estate planning while discussing your needs and wishes for your loved ones.

It includes special provisions in your estate planning documents, such as if the elderly in your family are going into a long-term care facility, a grandchild with special needs, charitable intentions for assets, or concerns about money handling by your family.

Considering all the above-mentioned details, they ensure that their strategy fulfils the following goals:

  • Successfully protects your wealth from legal challenges.
  • Reduce the amount of inheritance tax.
  • Protect your finances for your loved ones after your death.
  • Provide good retirement planning.
  • Update in beneficiaries, if required.
  • Pass on as much as possible to your beneficiaries.

Expert Estate Planning Consultant in Surrey

The knowledge of an expert estate planning consultant at Walpole Financial Management in Surrey is unmatchable.

Their constructed plans are effective because they are aimed at maximising the after-tax value of your estate to help the beneficiaries receive more wealth while avoiding legal challenges.

Our experts in Surrey are here to help you provide maximum to your family in the long term with their careful estate planning.

Estate Planning FAQs

Estate planning is potentially a time-consuming process. Researching your requirements for a seamless and quick process can make the process much easier.

Here are some questions and answers related to financial estate planning that you must know before you go for planning:

When an individual dies, all the assets in his/her possession become estate. It includes a house, any possessions, bank accounts, pension, insurance policies, car, jewellery, cash, etc.

These assets are then managed by an “estate administrator”, also known as “Executor” or your “estate trustee”, as appointed in his/her Will. The person is given the responsibility to gather up the estate and distribute it as instructed in the Will.

However, estate planning works beyond the scope of a Will that an individual creates. A complete set of estate planning documents is considered as:

  • A Last Will and Testament
  • A Lasting Power of Attorney for property and financial affairs
  • A Lasting Power of Attorney for health and welfare
  • An Advance Directive

For good estate planning to meet all your needs, requires considering all the necessary factors. Here are some listed below:

The Value of Your Assets
Inherited property possesses inheritance tax (IHT), which is highly influenced by the current and future value of your estate. Hence, passing on your estate to your family, friends, or even organisations has tax consequences, that too for both you and the recipient of your assets.

You can minimise or eliminate taxes on your estate through many strategies, provided you discuss your property value early with your estate planning advisor.

The Needs of Your Beneficiaries
After listing the names of beneficiaries, next comes their needs. Your beneficiaries may want to receive the assets you will be leaving in a different form. Their preference can be influenced by factors such as age, financial status and possible tax ramifications.

Hence, beneficiaries’ needs must be kept under consideration. However, your personal preferences on wealth distribution and its uses will remain effective.

The Choice of Your Plan
The two most preferred estate plans include wills and trusts. Each of the plans has its own set of benefits and drawbacks. An experienced financial advisor can help you choose the right plan that will be based on your unique situation, preferences, and family dynamics.

The Funeral Expenses
You would also have to mention your wishes as to how you want to carry out your funeral and the ways you expect it to be paid for. Make provisions for funeral expenses and outline your wishes to make it easier for your family and friends to arrange accordingly.

The Future Income
There are many incomes that are likely to come in the future and at the time they are received after the recipient dies. Always consider any possible income, such as insurance policies that may pay out after your death.

The Cash Gifts
Do consider cash gifts that you made in the last seven years to save inheritance tax. Also, plan for cash gifts to get protection against hefty inheritance tax.

A solid estate plan will allow you to update as your life situation changes, but only if it comprises all the required components. Following are the main components of a comprehensive estate plan:

Last Will and Testament
A last will and testament are drafted up with an estate attorney that mentions in detail who will receive which parts of your assets upon your death. It is the most essential component as it is the only legal basis to determine how all of your property will be distributed.

Power of Attorney
A power of attorney is the attorney appointed to decide on your behalf if you ever become unable to make property distribution decisions for yourself. If you do not appoint an attorney for the purpose, the court will appoint a person to play the role on your behalf. The court will appoint a conservator or guardian for your financial needs, which may not be of your choice and can be time-consuming as well as costly.

Living Trust
It is always wise to have a living trust as they can manage your estate both before and after your death. Besides, they can also prevent probate for items (not included in the will) that would otherwise have to go through this process. Some trusts also provide tax advantages for the donor, yourself, and the chosen beneficiaries.

The living trust is a legal arrangement between a person, law firm, bank, or an institution and a beneficiary. You appoint a person or an institution called the trustee to manage the items in the trust and they hold the legal title to the property.

Medical Directives
Medical directives are very necessary if you wish to make specific medical decisions about your life in advance. With the directive, you can select someone who can make medical decisions for you when you cannot make them for yourself.

Drafting a medical directive is a complex process and hence it requires an estate attorney. Typically, it needs the following documents:

  • A healthcare proxy
  • A living will
  • Medical instructions
  • A durable power of attorney

Beneficiary Designations
If you wish to distribute your assets as per your will paper, you should have a beneficiary named updated for the accounts, such as life insurance and bank accounts.

In case you do not keep these beneficiaries up to date whenever you update your estate plan, some plans may automatically distribute your fund to your children or your spouse. There are some other plans that may leave it to your estate. It can have tax consequences that you do not want your beneficiaries to pay.

Typically, people in their 30s own a home, have started a family, and have some financial assets. It can be an ideal time to review your decision of estate planning and protect your assets for your children and spouse.

Otherwise, people in their 50s and 60s should definitely become proactive and create required legal documents with the help of their lawyer or Trust team. Having estate planning documents in place will make it easier for your family members and loved ones to deal with your estate after your death.

For any individual, understanding UK estate laws can be a daunting and difficult task. A professional independent advisor on board can be incredibly useful to get tailored estate planning advice based on the complexity of your situation.

Here are some solid reasons why there is no substitute for expertise:

  1. Estate planning advisors are experts and have experience in conducting a thorough review of your assets and situation. During the process, any investments, property, pensions, businesses, life insurance and savings are taken into account.
  2. They determine the impact of inheritance tax possibly have on your assets and ways to minimise it.
  3. They also consider your future needs and personal preferences. This way, they acquire an accurate picture of your financial status before advising on your estate planning.
  4. Mostly they develop a bespoke estate planning strategy that may incorporate various trust funds, investment structures and policies to cover all your assets.
  5. Last but not least, UK legislation goes through some changes. A professional advisor is always updated with such changes. Therefore, they can arrange regular reviews to ensure that your plans are still up to date and can still deliver for you when needed.

An estate planning advisor works with you to discover the most effective way to protect your assets and help you to pass them on to your loved ones.