Complexity Of Inheritance Tax Rules Leaves Families Exposed
Complex inheritance tax rules are leading to innocent families being investigated by HMRC.
With HMRC now investigating approximately one in four estates that pay the death duty they have received a massive £274 million from their Inheritance Tax investigations in 2019-20, the highest in four years. This amounts to an average yield of almost £50,000 paid in IHT tax per case reviewed!
Why is this happening?
This is due to additional payments having to be made following an investigation and are nearly always down to the fact that the general public just don’t understand the complex rules, rather than any deliberate attempt to underpay death duties.
The problem is that those who are unskilled in the administration of estates frequently fall foul of the rules, with gifted properties being the most common gift to “go wrong”, generating around £300 million for HMRC over the past three tax years.
Fluctuations in both house prices and stock markets can also catch people out when valuing estates with figures showing that almost 200 gifts failed in 2019-20 and more than 400 the year before generating £109m in extra tax money having to be paid.
Using a Professional
It should not be underestimated just how much can be gained from having a qualified person(s) on hand at precisely the time they are most needed. Their knowledge ensures that the estate is dealt with correctly and in the most advantageous way for the beneficiaries.
Many people appoint a friends or relatives as the Executors of their Wills, believing that this course of action will save money on Probate fees and that those savings can then be passed onto their chosen beneficiaries, but this is often a false economy.
They also have the ability to deal impartially with any tensions and disputes that often arise amongst the family and friends of the deceased, so creating peace of mind for the testator that their wishes will be carried out to the full but without additional stress being placed on their loved ones at such a difficult time.
More and more people are now using trusts in their estate planning, recognising the exceptional benefits they provide in giving maximum protection to the assets left and protecting them for their chosen beneficiaries, from risk of attack from divorce, remarriage, taxation and creditors.
Selecting the right trustee is vital because they exercise a significant amount of control over the trust’s affairs and ensure that the trust is properly run and serves the purposes for which it was originally set up and they need to fully understand their duties and obligations under the trust deed and consider any tax benefits / implications to both the trust fund and the beneficiaries when dealing with the trust assets.
Appointing a Professional for these roles means complete peace of mind for the testator / settlor that there will be no nasty surprises to come once the estate is settled!
This article was submitted to be published by Countrywide Tax & Trust Corporation Limited as part of their advertising agreement with Today’s Wills and Probate. The views expressed in this article are those of the submitter and not those of Today’s Wills and Probate.