Free Guide to Inheritance Tax Planning, provided by Retirement Solutions Limited, Independent Financial Advisers. Welcome to our guide to Inheritance Tax, dedicated to helping you mitigate the potential effects of Inheritance.

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Tax on your estate, whether you are considering the use of family trusts or alternative solutions. Your wealth might encompass businesses, property and investments in the UK and abroad that require specialist considerations.

Helping you protect your wealth is an important part of what we do, and one thing is certain, you need to plan to protect your wealth from a potential Inheritance Tax liability. Benjamin Franklin once said that ‘nothing is certain but death and taxes’, and thanks to Inheritance Tax, they’re not only certain, they’re intrinsically linked. Once only the domain of the very wealthy, the wide-scale increase in home ownership and rising property values over the past decade have pushed many estates over the Inheritance Tax threshold.

Hundreds of thousands of households are at risk of paying inheritance tax (IHT). The much-hated tax is charged at 40 per cent on the value of your estate over the nil-rate band threshold – £325,000 for an individual and £650,000 for a married couple.

Once you factor in the family home, holiday properties, buy-to-lets, savings and investments, many people’s estates are now over this limit.

But there are ways to escape IHT and a few simple steps could ensure that your heirs pay nothing. Here we explain how.

Make a plan

Make sure you plan ahead , many families do not start thinking about IHT planning until it is too late, so the first thing to do is to work out if the tax will be an issue.

Get married

IHT is not payable when an estate passes between a husband and wife, or from one civil partner to another. Even better, married couples or civil partners can transfer the unused element of their Inheritance Tax free allowance to their spouse when they die.

A couple would escape tax on £650,000 by doubling up the allowance this financial year. In April 2010, when the nil-rate band threshold rises to £350,000, a married couple would escape tax on £700,000.

Give away assets

Giving away assets during your lifetime is a simple and legitimate way to take the sting out of death duties, as long as you do it in time. You can gift up to £3,000 a year and it is immediately exempt from IHT, or £6,000 if you did not make a gift of this kind in the previous tax year.

Live for seven years

It is possible to make further tax-free gifts known as potentially exempt transfers (Pets), but you have to survive for seven years after making the gift.

If you die within seven years and the gifts are valued at more than the nil-rate band threshold, you apply taper relief. The tax reduces on a sliding scale if the gift was made between three and seven years earlier.be there, you have to pay a market rent, which can wipe out the tax benefits.

The law allows you to leave an estate worth up to £325,000 (2009/2010) without having to pay any Inheritance Tax upon it. This £325,000 is called the ‘Nil Rate Band’. After the first £325,000, or the Nil Rate Band, the remainder of your estate will be charged 40% Inheritance Tax (IHT).

From 9 October 2007, spouses and civil partners can transfer their Nil Rate Band allowances so that any part of the Nil Rate Band that was not used when the first spouse or civil partner died is transferred to the individual’s surviving spouse or civil partner for use on their death.

The transferable allowance is available to all survivors of a marriage or civil partnership who die on or after 9 October 2007, no matter when the first partner died/dies.

The increased Nil Rate Band does not replace the single Nil Rate Band available to the survivor that determines whether or not their estate is an excepted estate.

How the transfer will work

Where a valid claim to transfer unused Nil Rate Band is made, the Nil Rate Band that is available when the surviving spouse or civil partner dies will be increased by the proportion of the Nil Rate Band unused on the first death. For example, if on the first death the chargeable estate is £150,000 and the Nil Rate Band is £300,000, 50% of the Nil Rate Band would be unused. If the Nil Rate Band when the survivor dies is £325,000, then that would be increased by 50% to £487,500.

The amount of the Nil Rate Band that can be transferred does not depend on the value of the first spouse or civil partner’s estate. Whatever proportion of the Nil Rate Band is unused on the first death is available for transfer to the survivor.

Good Inheritance Tax Planning can help reduce or eliminate any IHT due by using exemptions and releiefs within the Inheritance Tax rules.

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