Inheritance Tax Planning

This is the process of planning to protect your assets from what can be a significant amount of tax balanced by ensuring you have sufficient assets to live on for the rest of your lives.

Estate Planning involves creating and implementing plans and strategies to ensure your assets are passed to your intended beneficiaries and protecting your assets, distributing them according to your wishes, and making provision for your family. A carefully developed estate plan can potentially save your heirs from paying a substantial amount of estate taxes.

It may come as a shock to discover that a large proportion of your wealth, which includes all of your assets such as the family home, investments, life assurance plans not in Trust and even old family heirlooms will be subject to Inheritance Tax.

With the family home often making up a large percentage of an estate, the government has introduced an additional nil-rate band, known as the ‘main residence nil-rate band’.

An estate will be subject to Inheritance Tax (IHT) if, on death, it exceeds the individual nil-rate band which currently stands at £325,000. Calculating your liability is often, although not always, simple.

Value all assets remaining on death, subtract the nil-rate band remaining and what is left is taxed at 40%.

Careful Inheritance Tax (IHT) planning is all about passing as much of the proceeds of an estate as possible to chosen beneficiaries rather than to HMRC. It is also about maintaining flexibility and control over any arrangements that are made.

If your spouse dies before you without fully using their nil-rate band, the proportion of the unused amount can be carried forward to use on your death.

The levels and bases of taxation and reliefs from taxation can change at any time. Tax relief is dependent on individual circumstances.

The introduction of the Residence Nil-Rate Band (for Estates valued at less than £2 million) is being phased in as follows:

  • £100,000 for the tax year 2017/18
  • £125,000 for the tax year 2018/19
  • £150,000 for the tax year 2019/20
  • £175,000 for the tax year 2020/21

Thereafter, it will increase in line with the Consumer Price Index. It has also been confirmed that the existing nil-rate band will remain frozen at £325,000 until the 2021/22 tax year. The allowance applies to those estates that are ‘closely inherited’ and contain a ‘qualifying residential interest’ – this latter point means that the individual must have owned the property and have lived in it at some point. Therefore, with effect from 2019/20 tax year, if you give away your home to your children (including adopted, foster or stepchildren) or grandchildren, your threshold will increase to £475,000 or £950,000 for married couples and registered civil partners.

There are a number of vehicles and various methods that can be used to help mitigate Inheritance Tax (IHT), but no one method can, or should, be considered a ‘complete solution’ as each individual will have different circumstances and requirements.

However, ‘gifting’ and/or employing the use of trusts are often considered key strategies in protecting your assets.


A trust places the right money, in the right hands, at the right time.

It will allow you to retain control whilst protecting your wealth and mitigating the amount of Inheritance Tax your beneficiaries will ultimately have to pay.

Estate planning is not just about what happens to your assets after your death, it’s also about organising your wealth now to ensure you maximise its effectiveness –to safeguard and benefit your loved ones.

Trusts can play a very important role in the planning strategy.

Reasons for using a trust:

  • providing monies for successive generations and earmarking funds for family members
  • preserving monies which may otherwise be diluted due to divorce or bankruptcy of a beneficiary
  • mitigating Income Tax, Capital Gains Tax, or Inheritance Tax (IHT)
  • avoiding delays in obtaining a Grant of Probate.

So, for example:

If you want to make a gift to a grandchild or someone you do not believe is sufficiently responsible, you may prefer to retain some control over it either until the beneficiary reaches a certain age or until you decide that the recipient is sufficiently mature.

This can be achieved by using a suitable trust.

Trusts can help in the process of reducing or mitigating Inheritance Tax (IHT) and are also commonly used in helping provide for any liability.

They provide the flexibility and control that a Will alone might not.

The levels and bases of taxation and reliefs from taxation can change at any time. Tax relief is dependent on individual circumstances.

Trusts are not regulated by the Financial Conduct Authority or the Prudential Regulation Authority.


Gifting is a tax-efficient way of creating an investment fund for your beneficiaries and potentially reducing the value of your estate for Inheritance Tax (IHT) purposes. There are many types of gifts including; Potentially Exempt Transfers, Gifts out of Income, Annual and event gift exemptions and absolute gifts.  Each carries different outcomes and tax positions, so it is important to consider what and how you make gifts before acting.  However, the biggest consideration is your own financial security both now and for the rest of your life, before any substantial gifts are made.

The first question to ask yourself is do you know whom, or what, you want your wealth to be passed on to, either in your lifetime or following your death?

You may want to help your children with school fees: these can represent a sizeable expense and a Gift Plan can be used to plan for these costs while also helping to mitigate tax-saving benefits in the form of Inheritance Tax (IHT).  University / college fees: today, many children finish their higher education with sizeable debts – a Gift Plan can help reduce or negate this debt.

Intergenerational wealth management

Intergenerational wealth management is about how families use their collective wealth to support each other during their lifetimes. 

Increasing life expectancy and major social change mean many families need to reconsider how their wealth can work harder for the benefit of the whole family. We are now witnessing a phenomenon where the ‘baby boomers’ – those born in the post-war era and approaching retirement – represent the wealthiest generation in our society.

However, whilst they enjoy the fruits of their labour, they are sandwiched between elderly parents facing the challenges of old age and children struggling with the hangover of university debts and spiralling house prices. 

Traditionally, wealth has passed from one generation to the next upon death. However, intergenerational wealth management challenges that notion and looks at how families can use their wealth more collaboratively to support each other during their lifetimes.

At Fidelium Financial Planners Limited, we believe this innovative concept of intergenerational wealth management offers the perfect solutions to meet the modern family’s needs, whether it be:

Protecting the family: Intergenerational insurance policies offer much in terms of delivering the reassurance that everyone in the family is or can be covered.

Elderly parents: As our parents grow increasingly frail or vulnerable, many of us may worry about the most appropriate way to meet their needs. There are a number of options to consider, especially if they own their own home. This raises a host of issues. Should they move in with you? How could residential care be funded? Can they avoid selling their home to pay for care? They may, on the other hand, have a substantial estate; in which case, have they minimised their Inheritance Tax liability and, if not, how do you help them to do so?

Whether you are concerned about how you might fund care home fees for a loved one now, or in the future, Fidelium can access specialist support to help you and your family understand the options available and guide you through what can be a very sensitive and stressful time.

Getting on the property ladder: The difficulties facing younger people in joining the ranks of home ownership are well-reported, with renting often now stretching well into one’s thirties or beyond. Consequently, an increasing number of parents and grandparents are stepping in to help children onto the housing ladder.

There are a number of ways to do this: gifting, loans and providing security are all worth consideration. Many of these solutions have the dual advantage of helping with effective estate planning. However, caution – and advice – needs to be taken when considering which option to take to ensure that no unexpected tax liabilities result from this act of generosity.  Care also needs to be taken that any help you give, remains for the benefit of the intended recipient, so legal advice is crucial.

What our clients have to say

“Fidelium, headed up by Sarah Brown, has provided financial advice to our family for the past five years. Sarah has expertly navigated the anxieties of retirement, inheriting a shared home and supporting our adult children in buying their first property. Sarah is an exceptionally considerate person who has offered us such valuable advice and loyal support. She is reliable, patient and innovative. We could not recommend her more highly.”

Client since 2013 (5 years)

Dr Charlotte Feinmann , Consultant Psychiatrist, UCL

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