May 22nd, 2019
Majority of Over 45s Think Inheritance Tax Rules are too Complex
The number of over-45s looking for professional estate planning advice has grown sharply in the last year as confusion over inheritance tax (IHT) rules continues, according to Canada Life’s 2019 IHT Monitor.
Eighty percent of over-45s believe current inheritance tax rules are too complicated, which is a three per cent increase since last year. However, forty two percent have sought professional advice regarding inheritance tax planning compared to the thirty-two percent who said the same in 2018.
In January 2018 the Chancellor, Phillip Hammond, instructed the Office of Tax Simplification to conduct a thorough review of the inheritance tax system in order to investigate whether the current rules create potential for misinterpretation for taxpayers when making decisions. The Chancellor asked for suggestions to simplify the rules in order to ensure the system is fit for purpose.
Sixty four percent of over-45s think they need assets of £350,000 or more to see a financial adviser. Nevertheless, it is actually quite common for those with estates worth at least £250,000 to seek estate planning advice. Although the number of over-45s seeking estate planning advice has increased, unfortunately it is one of the most frequent misunderstandings about financial advice – that people need a significant amount of assets before they can seek financial advice for estate planning purposes.
The IHT Monitor 2019 found that rather than seeing a financial adviser, thirty percent of over-45s admit they would seek estate planning advice from their solicitor whilst nineteen percent would take advice from family and friends. When it comes to planning their estate, twenty eight percent are using their pension, twenty four percent are using ISAs and twenty percent are using a trust in their will.
Neil Jones, Canada Life’s senior technical manager, stated: “It is no surprise that the current inheritance tax rules are too complicated. The Chancellor’s review into the inheritance tax system is welcome, but his calls for simplification are long overdue.”
“Despite the persistent confusion, it is encouraging to see a significant number of over-45s seeking financial advice, up from last year. While seeing your solicitor or asking friends and family for help with estate planning might be easier, the only way to properly cut through the red tape is to tap into the years of experience and expertise of a financial adviser.”
“One of the most common misconceptions is that a person must have a certain estate size before it becomes worth their time consulting a financial adviser. In reality, people with estates valued at £250,000 would potentially benefit from seeking professional estate planning advice, just like those with more valuable estates.”
“Of course, it’s not just about those who are giving the inheritance. Those who will inherit these estates also need to consider the impact on their own inheritance tax position.”
In conclusion, this information highlights the need to get experienced financial planning advice whether you receive an inheritance or are planning your own estate to ensure your money works in the best way possible for your hopes and intentions. Prosser Knowles are well placed to help you with this and will also work together with your accountant and solicitor to provide a joined up approach, if required.
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Written by Kay Crooke – Associate Practice Director at Prosser Knowles Associates Limited.