Government legislation affects almost every aspect of our lives, and decisions about our finances are often based on new rules that we didn’t anticipate when starting to invest or build pensions pots or plan for retirement.
Those taking a keen interest in the autumn budget will be aware of the changes to Inheritance Tax (IHT), demonstrating how new rules may require us to reassess our lives and the way we live them, and why it is important to regularly reassess how the decisions we make today could impact future inheritances for our loved ones.
Worryingly, too many consider themselves either too young to make a Will, or having insufficient assets to be concerned about IHT.
Those who feel they are too young to consider what may happen at the end of their lives should remember that not everyone is old when they die, nor can they predict what may befall them later on. It is never too early in life to take measures to ensure that our loved ones will gain maximum benefit from our estate when we die.
Older people on the other hand often don’t consider that their estates include property that has risen hugely in value since initially making their Wills, and which could mean their estates may now attract an IHT liability.
Currently the standard IHT threshold is £325,000 per person and estates exceeding this are taxed at 40% on the excess amount. Whilst the Chancellor has advised the threshold will remain unchanged until 2030, a Wealth and Assets survey for the Office of National Statistics covering the period April 2020 to March 2022 showed the Median household wealth for households with a household head aged 65 to 74 years was £502,500.
To put this into perspective, house prices have risen on average 3.5% since 2022, which means even more estates will have slid into the grasp of IHT. An additional threshold is available for properties passing to lineal descendants, i.e. children or grandchildren, but those without children may be more harshly treated by the current tax regime.
All of this demonstrates that regularly updating your Will is pivotal in effective IHT planning. It can also spare your loved ones from conflict, and ensure your best financial intentions are followed exactly as you planned.
