Minimising Inheritance Tax

[Leigh]

My mother is about to re-write her will following the death of my father and wants to minimise the Inheritance Tax payable on her estate when the time comes. We know about annual and lifetime gift allowances but can Trusts be used in some way so that she can still access the funds during her lifetime if necessary? Any suggestions?

[tax accountant]

Hello Leigh,

Trusts can be used effectively to minimise inheritance tax dependent on the circumstances. There are of trusts that can be established, however in order to provide specific advice further details of your mothers estate, and her intentions/lifestyle needs is required.
The capital gains tax and income tax implications must also be considered as reorganisation of your mothers assets will have a significant impact in these areas.
This is a complex area, however if you would like me to assist you please e-mail me your contact details and i will give you a call to discuss the further information that would be required.

Regards,

M Tomlinson
Tax accountant

mal-tomlinson@lineone.net

[steve@nunn-hayward.c]

Hi Leigh,

Before looking at the question as put, May I suggest if not already considered and still within time limits that your mother entering into a deed of variation may be worth looking at. In this way it may be possible to establish a trust to take the "nil" Inheritance Tax (IHT) band (£242,000) out of your mother's and indeed your own estates but with access to the income/capital should it be needed. It will very much depend on the assests in the estate , but potentially saves £242000 @ 40% ie £96,800 that may have to be paid when your mothers time comes.

Because the above is not a gift from your mother she can enjoy income/capital if needed during her life-time without jepordising the IHT saving. The same as I suspect you are aware from your query is not true for "gifts" made by your mother from which she can benefit.

A careful assessment of her position both short/medium and longer term should be made. If this identifies surplus assets/income then I would suggest it is time to think about "tax planning".

Absolute gifts of surplus assets into trusts etc for future generations or regular gifts of surplus income could be IHT efficient. If cash is involved then other capital/Income taxes should not be relevant.

Though not an area I specialise in, I would suggest you should also ensure that if Long term care is a possibility that this is planned for to ensure that local autorities cannot set aside genuine family plannig stratergies as attempts to reduce contributions to care costs.

As you can see there is a lot involved directly and indirectly with your query. I would be pleased to chat through your requirements and agree a way forward.

Please call me if you wish to take things further.

Regards

Steve Cook , ATII
Tax Partner,
Nunn Hayward, Chartered Accountants
01753 888211