Please Do Not Feed the State (more than you must)


As an occasional reader and regular supporter of the LA, I notice that one of the State’s tentacles often escapes our attention: Inheritance Tax (IHT). This is a tragedy, especially since careful Estate Planning means you can do a great deal to reduce the amount paid, and so increase the sums you leave to the people and the causes most important to you.

At time of writing, IHT kicks in at an eye-watering 40% on everything above the Nil Rate Band limit of £325,000. A surviving spouse can have the unused portion of their late spouse’s allowance added to their own, up to a maximum of double the personal IHT allowance. But will even £650,000 be enough in a few years’ time to prevent the State from enriching itself at your heirs’ expense?

True, IHT is about to be reformed. Much is being made of future couples being able to transfer estates of up to £1 million to their children by 2020, but the relevant allowance increases will be phased in, and it looks as if they will be hedged about with various restrictions on who will be able to inherit what and how much. Given that the State needs to raise more money while at the same time having more people able to pay their own way through every stage of life, these restrictions will become the focus of vain attempts to square the proverbial circle.

What will this mean for you and me? More complications. In other words, you will almost certainly benefit from having on-going advice from a specialist company dedicated to helping you navigate these pitfalls. Make do instead with downloading a cheap DIY Will kit off the internet, and you could be leaving your family and friends a very nasty and expensive surprise in a few years’ time.

While there are a growing number of companies and solicitors advertising their services in this area, many of them are still very small. The largest practitioner in this area at present has been carrying on business since 2011, but The Will Associates (TWA) already has estates worth an estimated £2.6bn (and rising) covered by the Wills its legal staff keep securely stored for the clients.

For my part, I have found the staff to be friendly and professional at all times, and note the absence of complaints online about the company’s conduct. TWA offer a range of Estate Planning services, including Wills, Lasting Powers of Attorney (for individuals and their businesses), Trusts, Wealth Management, and Pre-Paid Funeral Plans and Pre-Paid Probate Fees.

Solicitors typically charge between about 2% and 8% by way of probate fees and related costs and disbursements. Moreover, a local practice may well be lacking in experience of administering estates involving overseas properties, or in first registration of an older property at the Land Registry. By contrast, TWA charge probate fees starting at 1.95% plus costs and disbursements. It also has extensive experience of registering properties with the Land Registry for the first time, and of dealing with estates involving overseas properties. So even if you already have a Will you’re happy with, it is almost certainly worth your while to appoint them as your Executors.

Lasting Powers of Attorney (LPA’s) are another essential tool in your struggle to hang on to what is rightfully yours. Who would take charge of your financial affairs if you became incapacitated? Who would speak up on your behalf to the doctors about your medical treatment, if you couldn’t speak for yourself? And what if you own a business? Would you want the same people you trust to buy your groceries running your business for you? Hence TWA offer both kinds of personal LPA (one for health and the other for finances), and a separate LPA to deal with control of your business if you own one.

I like the company so much that I’ve signed up to represent it. Normally, I try to confine my appointments (“Would you like me to come round and have a chat with you about it over a cup of tea?”) to a journey of an hour or so from my home in Surrey, but I’m happy to go further afield in this case.

This means you have the chance to conduct arguably the most private of your financial matters with a trained, professionally insured, committed fellow libertarian – someone who like you understands the close link between personal privacy and individual liberty; and I can offer you a free annual review thereafter. But first you need to find out if this is right for you. Why not visit The Will Associates website to find out more? They offer a free guide you can download to help you work out what you want to do next.

Libertarians are often noted for being long on individual rights while being short on the ability to agree about anything else at all. But surely there is one thing we can all agree on:

Libertarians do not feed the State unless they must.

If you’re a homeowner in the South or South-East of England, I’d like to help you in person to keep more of what you’ve inherited and earned for your own benefit and that of those you love and care about. I’d also like to offer you the choice to help feed a thankful fellow libertarian today instead of the faceless, ungrateful State tomorrow while you’re about it.

If you live further afield, rest assured that TWA will put you in touch with a nearby Estate Planning Consultant, who will no doubt contact you to arrange a no-obligation chat about your current situation and how TWA might be able to help you.

Whether you decide to accept this invitation, for your own sake as well as that of many others, please will you at least put a Will and a Lasting Power of Attorney in place for yourself? Thank you.

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4 comments

  • The present IHT System is absurd, even in terms of the objectives it’s supposed to be designed to achieve. Paying IHT is optional, but only if you’re very rich.

    There is a case for a Tax on Inheritance, but it’s purpose should, like all other taxes be focussed solely on raising money. And we all know that low tax rates raise more income per % than higher ones.

    If you tax something at zero % you raise no money. If you tax something at 100% you also raise no money (or at best a miniscule amount). At some point on the spectrum there’s an optimal rate.

    40 % is not an optimal rate. It encourages people to engage in economically inefficient tax planning and misallocates resources.

    Anecdotal evidence suggests that above about 25% or a little higher the total yield from Capital Taxes actually falls. It’s no coincidence that the Higher Rate of Capital Gains Tax is set at 28%.

    There’s no possible case for taxing Inheritance at a Higher Rate than Capital Gains.
    The starting point for any IHT Reform should be to cut both CGT and IHT to the same rate of (say) 25%. The amounts raised in Revenue would almost certainly increase. The authorities can then experiment with whether or not it should go lower. My guess is that it should probably be cut to 20%.

    Conversely however, what (apart from from politics), is supposed to be the justification for having a much bigger IHT exempt band for inherited owner occupied houses than for say (shares)?

    All this does is encourages people to avoid paying any tax at all, by keeping their assets tied up in housing that’s far to big for them, when by any rational economic standards money is best invested in productive asset.

    If someone’s only asset, upon death, is a valuable house, that he’s been living in, the chances are, that nearly all of that value has arisen in the form of a Capital Gain and has never been taxed. Yet if he ‘s lived in a much cheaper house and has been investing his money in something productive (even in a property for let), he’s clobbered for 40% IHT.

    The grossly favourable tax treatment of owner occupied property has been a key drag on the UK economy’s performance, and is much the biggest single causative feature of state sponsored inequalities in society. Owner occupied property should (partially at least) be brought into the tax base and the money raised used to cut marginal Capital Tax rates and the Marginal Tax rates on income in general.

    • There is a case for a Tax on Inheritance

      Oh, I’m not so sure about that …

  • Commendable post. I was saying in a conversation only a few weeks ago that if I were a financial advisor, I would ruthlessly and proudly promote tax avoidance as much as possible. I wish I could have spoken on behalf of those “celebrities” a few years back who were bullied into making faux apologies for benefitting from tax mitigation schemes because it was “immoral”; I would have used the publicity as an opportunity to refuse to say sorry and to promote my services on camera.

    Although this is a broader issue than inheritance tax, I would like to see more of the so-called 99% following in the example of Crickhowell, <url=”http://www.independent.co.uk/news/uk/crickhowell-welsh-town-moves-offshore-to-avoid-tax-on-local-business-a6728971.html”>the Welsh town that went on tax strike, even though this campaign is only doing so in order to close loopholes, according to its <url=”https://fairtaxtown.com/home/the-protest-stragegy/”>website

    Out of interest, is transferring ownership of your house into an offshore trust, thereby rendering the property outside the UK for tax purpose, difficult? I remember when Panorama uncovered that the notoriously litigious billionaire Barclay brothers had done that with their London mansion.

  • Commendable post. I was saying in a conversation only a few weeks ago that if I were a financial advisor, I would ruthlessly and proudly promote tax avoidance as much as possible. I wish I could have spoken on behalf of those “celebrities” a few years back who were bullied into making faux apologies for benefitting from tax mitigation schemes because it was “immoral”; I would have used the publicity as an opportunity to refuse to say sorry and to promote my services on camera.

    Although this is a broader issue than inheritance tax, I would like to see more of the so-called 99% following in the example of Crickhowell, the Welsh town that went on tax strike, even though this campaign is only doing so in order to close loopholes, according to its website.

    Out of interest, is transferring ownership of your house into an offshore trust, thereby rendering the property outside the UK for tax purpose, difficult? I remember when Panorama uncovered that the notoriously litigious billionaire Barclay brothers had done that with their London mansion.

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