Recent research shows that most adults don’t have a will in place and that more than half have no plans to carry out any estate planning to mitigate inheritance tax.
In our experience, clients typically take one of two views when it comes to inheritance tax. One group view inheritance tax as inherently wrong and will take any necessary steps to ensure their family pays not a penny more than necessary. Another group takes the view that their children are set to inherit more than they ever did, even after the inheritance tax bill is paid, so they are prepared to take the death charge on the chin.
Whether you fall into one of these two groups or take a view somewhere in the middle, you’re unlikely to feel particularly happy about the proposed increases to probate charges.
But new research has found that families are set to face increasingly higher inheritance taxes due to a mix of these rising bills and a sense of apathy towards inheritance tax.
The research, carried out by Saga, found that 63% of adults don’t have a will in place. They also discovered that 40% of under 50s have no plans to write a will.
Even more worryingly, only 11% of those surveyed reported having carried out any estate planning to mitigate inheritance tax, and more than half said they had no plans to carry out any such planning.
Despite this widespread apathy towards inheritance tax, a quarter of people who plan to leave an inheritance to the next generation said they have consciously reduced their expenditure so they can leave more behind to the kids.
New rules scheduled to come in later this year, dubbed by some in the press as a ‘stealth death tax’, are set to cost some families an additional £6,000 in probate fees. This is because families previously paid a flat-rate £215 for a grant of probate. The new fee schedule is instead based on the value of the estate, with around 280,000 families a year paying more as a result.
Around 56,000 families a year are forecast to face probate bills of between £2,500 and £6,000 when the new fees are introduced, instead of the previous flat-rate charge.
Jeff Bromage, Managing Director at Saga Personal Finance commented: “The lack of engagement and awareness surrounding estate planning and wills is worrying. Only 15% of under 50s have written a will, and while this rises to 60% of the over 50s, just 11% of the population has conducted estate planning to manage the inheritance tax levied on their estate upon death.
“With a quarter of people who plan to leave an inheritance already cutting costs to increase the amount of money to be left to their beneficiaries, there is a deeply concerning lack of understanding surrounding what individuals can really do to better mitigate against inheritance tax. On top of this, with the stealth death tax creeping in next month, beneficiaries of estates over £50,000 will be hit even harder by new tax levies.
“There is clearly a desperate need for education in this space, to help people ensure that both the ‘right people’ receive the correct inheritance and that beneficiaries are not paying unnecessary high taxes. People should never feel obliged to reduce their outgoings to leave a larger provision for their families; with appropriate estate planning and tax management, we hope this concern will be alleviated and, simultaneously, the recently bereaved won’t be faced with spiralling taxes.”
If you’re facing an inheritance tax bill for your loved ones, the first step to take is to understand the scale of the issue. Working with a Kellands Financial Planner would be an excellent way to calculate the projected inheritance tax bill, before exploring the steps you can take to mitigate this tax.
It’s also important to write a will and keep it up to date, so it continues to reflect your wishes. Having a valid will in place is the single best way to make sure that the value of your estate is distributed in line with your wishes when you die.
To discuss how some inheritance tax planning could benefit you and your family, contact Kellands today.
Taxation reliefs, levels and bases can change in the future and the contents of this article refer to our understanding of current taxation legislation. Tax is dependent on your own personal situation and circumstances and is subject to change based on UK legislation and taxation regime.