Time Investments has called on families to seek advice following the government’s forecast that inheritance tax (IHT) receipts will increase over the coming years.
Government forecasts have suggested IHT receipts are set to increase from £5.4bn in 2018/19 to £6.9bn in 2023/24, a £1.5bn increase over the next five years.
The investment firm has therefore called on families to seek advice to ensure they do not end up paying more than is necessary.
Time IHT tax expert Henny Dovland offered a number of suggestions when considering intergenerational financial planning – for example, recommending investors think about how much income is required and how long it needs to last.
“This is a difficult question but with an idea of inflation expectations, lifestyle and health, some indication can be achieved,” she said. “Next is to establish whether that income target can be reached based on an assessment of their available assets.”
Dovland also said IHT planning should be considered where there were surplus assets and passing cash to family members may be the easiest route to take. “Indeed, aside from the use of small and annual gift allowances, larger gifts will typically take seven years to fully fall outside of the taxable estate,” she said.
She also said flexible pensions were another tax-efficient way of passing money down through the generations, adding: “If the pension scheme member dies before age 75, their nominated beneficiaries will not have to pay any tax on withdrawals, whether as an income or lump sum.
“A more complex option, but with greater restraints on the recipients, is to set up a trust, which is exempt from IHT. As with gifting, however, once the assets are in the trust the individual loses control.”