Start inheritance tax planning 'earlier'

A financial expert has spoken out to say that people must begin dealing with inheritance tax issues earlier due to the complexity of the system.

Bob Fraser told Ftadviser.com that the 2006 Budget made inheritance tax planning more difficult, as people could no longer use potentially exempt transfers to place large amounts in trusts.

"Gifts into trusts, other than for disabled persons, are now limited to the nil rate band, currently £325,000, unless the settlor is happy to pay 20 per cent immediate tax on the excess," he said.

According to the probate expert, inheritance tax planning must be begun sooner by people who have estates that they do not want to decrease by more than this amount.

He said that a progression of gifting can be used as if the settlor lives for seven years it is usually the case that gifts fall out of account. Couples doing this will double their benefit, Mr Fraser said.

In addition, Lovemoney.com said that placing a life insurance policy in trust will ensure that payouts from it go to the right people.

Published by Tessa Jones