"With careful planning", says David Semmens in The Daily Telegraph, business property relief can "reduce or even negate inheritance tax on all your assets, business or otherwise".
Say you and your spouse jointly own a house and investments worth £1m in addition to £750,000 worth of family company shares (classed as Relevant Business Property and so IHT-exempt).
Assuming you die within a couple of years of each other and those values remain the same, there will be no IHT on £700,000 (the value of your combined 2010 IHT nil-rate bands) and no tax due on the £750,000 business assets. That still leaves a £120,000 bill (40% of the other £300,000).
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
So your will should leave the business assets to a "discretionary trust of which your spouse and children are potential beneficiaries and your spouse one of the trustees". After your death, your executor trustee could then give those assets to your spouse "in exchange for an 'IOU' secured on the family home".
That debt reduces your spouse's net estate to below the £700,000 IHT-free band, so there is no tax to pay. One to seek tax advice on.
-
Millions at risk of 'unnecessary' tax bill – how to shield your savingsMillions of Brits could be taxed on their savings interest this year as their savings interest exceeds the personal savings allowance. Are you at risk?
-
Savers will have to wait as long as 48 years to build a £1m cash ISA pot if allowance is cutChancellor Rachel Reeves is rumoured to be planning a cut to the cash ISA allowance in the Autumn Budget, making it harder for savers to build wealth. Will you still be able to build a £1 million cash ISA pot?
