A Stitch in Time?

What would happen if you inherited a significant amount of money? You might want to spend it, perhaps move house or invest it. But whatever you choose the chances are that the value of your own estate will have increased substantially and you may be facing a situation where your estate will pay more inheritance tax (IHT) in the event of your own death later on.

But how can you avoid that happening without giving up on your inheritance?

Ideally, the person leaving you your inheritance, say a parent, would modify their Will to include a special form of Trust which would allow you to benefit freely from the inheritance (just as if the money had been left to you outright) but in a way which can avoid those IHT problems later on.

We appreciate that with some people this may be a difficult conversation to have. However, if you point out to them what will happen if they don’t – i.e. that a significant amount of your inheritance is in danger of being used to pay a large IHT bill, this may make the idea more appealing.

What is worse than receiving a large inheritance?

Receiving no inheritance at all! It happens. The cost of long term care can often exhaust a person’s estate leaving very little to pass on to the children or to other beneficiaries. But, again, there are things which can be done. If your parents, for instance, are both alive they can put in place specially structured Wills to build in a significant degree of protection against the cost of long term care, thereby preserving a large part of the estate for the long term benefit of the children and other family members and friends. Again, it might be difficult to raise these sorts of issues in conversation but perhaps it is useful to point out what could happen if they don’t – most of the their hard earned cash could be used to fund long term care costs instead of benefitting their family.

Perhaps a good way to broach this subject is to suggest to your parents, other family members or friends that they have their existing Wills reviewed to make sure that their wealth is not swallowed up in care fees or IHT. We offer a free Will Review Service. Please contact Tony Hall for further details.