Chartered Surveyor and Director, Fothergill Wyatt
any people believe they can simply estimate the value of a property for the purpose of their estate, and often consider undervaluing to avoid paying higher taxes. This can lead to complications, delays and penalties if questioned by HMRC. Many people ask how a formal valuation for probate differs from a free market appraisal by an estate agent. The Royal Institute of Chartered Surveyors Red Book defines a valuation as: “The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.” An estate agent will be offering
KARI MELLON Managing Director, Opes Tax
find that a bespoke strategy is the best way to mitigate your IHT exposure and I always advise clients to review their IHT position at the earliest possible opportunity. This gives them the maximum time to consider and implement any suggestions. A bespoke strategy will dovetail with your personal goals and it could include the following: ◆ Maximising allowances, such as the new residence nil rate band, which in
you a figure that they would market the property at. This may be set high with a possible view to negotiating down and as a strategy to win business. This valuation holds no substance in the eyes of HMRC. By instructing a RICS Registered Valuer you have the assurance they are qualified and experienced to value the property in question, and if the HMRC raise any queries during the process, the surveyor would be obliged to answer these and justify both their comments and their valuation. Sam deals on a regular basis with the valuation of residential property for official purposes such as Grant of Probate and Inheritance Tax.
the current tax year could give your estate a further £100,000 to add to the £325,000 threshold (providing the relevant conditions are met!). ◆ Maximising reliefs, such as Business Property Relief, which can result in qualifying assets (like shares in unquoted trading companies) being up to 100% free from IHT. ◆ Tax efficient gifting of assets to family members. ◆ Establishing a family trust to provide for future generations for up to 125 years. A bespoke strategy should also be accompanied by a Will. This is the only way to ensure your estate is distributed in accordance with your wishes and for married couples and civil partners, it can delay the IHT charge until second death, thereby giving more time to implement planning strategies. Get in touch if you’d like to start designing your own IHT strategy.
DISABLED PERSONS TRUST
eceiving an inheritance can be a disappointment for a disabled person as it will normally be counted as an asset for meanstested benefits. It can mean that a once-ina-lifetime opportunity to lead a more comfortable life makes little difference. The inheritance money simply replaces state-funding benefits until their funds drop below a certain level. A Vulnerable Beneficiary Trust or Disabled Person’s Trust can be a way of ringfencing the windfall so that means-tested benefits are not affected. In practice, this device is rarely used by Will-drafters, as the qualification and drafting requirements of such a trust have, to date, been complex. It gets better – not only can such trusts avoid means-testing, but they also avoid the harsh tax regime that now applies to UK trusts. I have seen disabled people disinherited from a will to protect their means-tested benefits; that is the wrong way to go around this issue as this can be contested under the Inheritance Act 1975. A Vulnerable Persons Trust can also be utilised where you might want someone to inherit who is, for example, alcohol dependent or a drug user. You might not want to foster their lifestyle in this way so you can lock away their inheritance into a trust so the inheritance cannot be abused. Giving inheritance to those who are not considered sound of mind can be complex, it’s important to think ahead.
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