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Inheritance tax tip sheet

Give your surplus to charity

MAKE A WILL! Just do it…go on, you know you want to…well, all right, you don’t really but if you don’t do it, whatever age you are, a large chunk of the money you have will go to the Government to waste in its own special way. See here for more information on how to go about it and how to do your own will if you’d like to go that route.
Transfers of assets between spouses and civil partners are exempt from inheritance tax. Anything your husband or wife inherits from you is tax-free, although this is not the case if you just co-habit. Your partner then has to pay tax on anything that didn’t have their name on in the first place.
Give away as much as you’re allowed to while you’re still alive. It’s much nicer, anyway, to experience your children’s (or your favourite charity’s) gratitude while you can.
Give as much of your surplus as possible to charity in your will. Better for them to have it than the tax man. Go to Rememberacharity for more information on how to do this.
Invest in AIM-listed shares. AIM is the Alternative Investment Market and is like a FTSE index for small companies. Many small companies start on the AIM market and then transfer to the FTSE when they ‘grow up’. Some AIM-listed companies can do very well indeed but because the companies are small it can be very volatile and you can lose a lot if you’re unlucky with your investment.

However, most AIM companies are what is called ‘unquoted’ and, as there’s an odd little IHT rule that says that any assets held in an unquoted company qualifies for 100% IHT relief after the money’s been there for over two years, tax planners have become rather excited about it. It isn’t easy to work out which companies are unquoted and which aren’t. The Revenue doesn’t provide a list of them, helpfully, and just suggests that you seek advice from a tax accountant or financial adviser (and hope that they know – they don’t always!) Go to Unbiased for local financial advisers and the Chartered Institute of Taxation (CIT) for tax advisers.
Set up a trust. This is a written arrangement whereby an appointed trustee is given money or assets to hold and manage on behalf of the person you want to benefit. They’re a useful, if sometimes complex, way of giving money, property or shares to others while ensuring that someone you trust (hence the name) is overseeing them. You can create a trust while you’re alive by a formal trust deed (or ‘settlement’) or you can create one in your will (a ‘will trust’). You will need advice on this so find out about local experts from the Society of Trust & Estate Practitioners (STEP).

Get expert advice. If you have a fair amount of assets or a complex personal situation, it’s best to get proper advice on inheritance tax planning. If your accountant is a specialist in this then speak to him or her, but most aren’t so it’s best to ask around or look on the STEP Or CIT websites.
Grow up before you check-out. Don’t use your will as a means of getting your own back on relations who have annoyed you. Be remembered with affection! Remember a will is open to challenge if, for example, you don’t leave money to a spouse or, if you are unmarried, to your children

Jasmine and the Moneymagpie team
Moneymagpie Moneypedia
14.02.2008