Estate Planning

Estate Planning and Inheritance Tax

Estate planning is an ongoing process and should be started as soon as one has any measurable asset base. As life progresses and goals shift, the estate plan should move to be in line with new goals. Lack of adequate estate planning can cause undue financial burdens to loved ones (estate taxes can run higher than 40%), so at the very least a will should be set up even if the taxable estate is not large.

 

Some of the major estate planning tasks include:

 

  • Creating a will
  • Establishing a guardian for living dependents
  • Naming an executor of the estate to oversee the terms of the will
  • Creating/updating beneficiaries on plans such as life insurance, pensions and investment portfolios
  • Setting up funeral arrangements
  • Setting up a lasting power of attorney (POA) in case of mental incapacity
  • Establishing annual gifting to reduce the taxable estate
  • Limiting estate taxes by setting up trust accounts in the name of beneficiaries

 

For British expatriates estate planning is especially important.

 

British expats who have achieved UK non-resident status may believe they are not subject to UK inheritance tax (IHT), just as they are usually able to avoid UK income and capital gains taxes. However, IHT is levied on those who are UK-domiciled, whether resident or not, and very few expats manage to achieve non-domiciled status. (even if they think they have)

 

So, when you die, whether while UK resident or not, the UK taxman will charge IHT at 40% of the value of your World-Wide estate above £325,000. Your estate comprises of property (including your home) and all your other assets held in the UK and abroad.

 

Various financial planning measures can be put in place to reduce your potential IHT liability. But you will need the help of an experienced adviser to do this properly.

 

If you would like to learn more about Estate Planning or would like a review of your own Inheritance Tax Liability.

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