News/Events

Inheritance Tax [18th September 08]

According to reports, Warren Buffet who is one of the richest people along with Bill Gates, philosophy on the generation game is that “a very rich person should leave his kids enough to do anything, but, not enough to do nothing.” I have clients who have been determined to reduce their Inheritance Tax IHT down to as little as possible and give as much away as possible in the hope that they will live 7 years. The gifts will then be outside their estate(s) on their eventual death. They have downsized after 35 years in the same house and moved to a property which they are not happy with and in particular the neighbours which they didn’t really have three years ago. Only last week I got a call “oh number two son is getting married” so I need another £40,000 cash as if I gave him £20,000, I need to do they same as with number 1!

On the other side of the coin, I have other clients determined to spend what they want and enjoy life and what’s left is well, “more than what we got from our parents”.

Another multi millionaire once reported as saying “I have never found a link between money and happiness but I have found a link between success and happiness.”

However, in order to distribute wealth, you first have to accumulate it and modern way of life places many constraints on this objective. It starts with education and in particular university and having two sons who seem to be becoming perpetual students, I know how difficult to keep costs under control! What debts will university students have when they start work? Then there is car, a wedding, a house in particular, and of course, here we go again – children.

Up to the recent fall in house prices, the value of ones property had surprised many families as it had comfortably dragged them into the net of IHT. Indeed, more often than not, when everything was totted up, on paper their total assets make them millionaires. How often have you heard someone say “I’m worth more dead than alive”?

It is critical that everyone has a plan of action for their future wealth creation and how they should spend it and think carefully how they want their children to benefit.

If you have accumulated and looking to be generous and have the taxman in mind there are many schemes available. These can, in some cases, reduce the liability of IHT immediately or steps can be taken to place funds in your children’s hands at the right time.

Needless to say, careful thought and a chat with your solicitor or / and IFA makes a lot of sense and really this should be sooner rather than later. (The Financial Services Authority does not regulate Tax Advice.) 

I have not commented on the recent turmoil in the financial world as this is all moving very fast, if you have concerns or would like an up to date view please feel free to contact one of our offices.

This article was written by Langtons - Published in the Western Morning News, Money, 18th September 2008