Indeed, encouraging clients to share some if not all of this information with their family is an important first step.
Laura Suter, personal finance analyst at AJ Bell, says: “Since 2015, pensions are more attractive from an inheritance point of view, meaning it is more tax efficient to pass on your pension wealth to your children or grandchildren.
“The same changes were not made to Isas so this money still counts towards your estate for [IHT] purposes.”
This means that pensions are one of the most tax-efficient ways to pass on wealth and, if a client dies before the age of 75, the benefits left in a pension can be paid as a lump sum or income to a beneficiary tax free, adds Mr Whitcomb.
Gifting
Clients often overlook the annual gifting limits too, with every individual able to give away up to £3,000 a year before the taper kicks in, according to Ms Suter.
She says: “This can also be backdated if it has not been used in the previous year, meaning a couple who have not used the allowance until now can give away £12,000 in the current tax year.”
Additional gifts for weddings of up to £1,000 per person, £2,500 for a grandchild or great-grandchild and £5,000 for a child, and small gifts of up to £250 per person each year, can be added on top of the other limits.
A less clear-cut allowance concerns the ability to gift money out of income, adds Ms Suter.
She explains: “There is no monetary limit attached to this but, instead, you need to prove that gifting the money won’t affect your standard of living.
“For wealthy people with substantial income, this can prove very lucrative.”
She continues: “If you leave 10 per cent of your estate to charity in your will, the rate of [IHT] you pay on the rest of your estate is reduced.
“That gift to charity from your estate is free of [IHT], and the rate on the rest of the estate, after gifts and allowances, is reduced from 40 per cent to 36 per cent.”
She adds: “The nuances of many of these rules show how important it is to have a will and ensure the right people are being left the correct assets to make the estate as IHT- beneficial as possible.”
Indeed, one of the easiest steps is to get clients to start to think about making lifetime gifts.
“Start with the simple things, such as gifting money to a younger relative to top up their pension or paying into an Isa for a youngster,” says Mr Whitcomb.
“All these things can be transformative for that person’s life. Remember each year to give away £3,000 and that gift will not be subject to IHT.”
