Inheritances steadily rising – Is your Will up to date?
New research by the Centre for Economics and Business Research has suggested that the total annual value of inheritances (i.e. the value of assets passing from one generation to the next each year) will rise by more than 60% in the next 10 years.
The figure is currently £69 billion per annum and the research suggests that this will increase to £115 billion by 2027. This is fair reflection of my day to day experience. Clients who may not consider themselves to be particularly rich are often surprised when they sit down and calculate the likely value of their estates when I am advising them in relation to their wills.
The report from the Centre for Economics and Business Research suggests that the rapidly increasing value of inheritances is largely being driven by rising property prices which, again, chimes with my experience. In many parts of LCF Law’s traditional heartlands of West and North Yorkshire even a relatively modest house will now be worth more than the inheritance tax threshold of £325,000.
Discovering that you are worth more than you thought can be a pleasant surprise, but the downside is that clients are often faced with a potential inheritance tax bill that is larger than they anticipated. The inheritance tax exposure can often be mitigated, however, by relatively straight forward tax planning advice. It is therefore crucial to review your will regularly to make sure that it and the way you arrange your affairs generally keep pace with your changing circumstances.
Some clients will be helped by the recent introduction of the residence nil rate band, which is an additional inheritance tax allowance over the basic £325,000 which can be set against the value of a residence which is passed on to direct descendants. The new allowance is £100,000 from April 2017, increasing by a further £25,000 in each of the next three years.
It is necessary, however, to meet certain conditions to qualify for the residence nil rate band and whether or not you will be entitled to it can depend upon the wording of your will. This makes it a particularly important time to review and, if necessary, update your will.
The message is that now is the time to review your affairs. The recent research by the Centre for Economics and Business Research highlights that you might be worth more than you think and there could be important steps to consider to ensure that your beneficiaries enjoy the full benefit of increasing inheritances and do not lose more than is necessary to tax.
Further advice please contact Mark Jones on 01423 502211 or