The best inheritance tax plan in the world

I have always said to clients who are worried about being exposed to too much inheritance tax, that the best inheritance tax plan in the world is… to spend your money and enjoy it.
 
In real simplistic terms, a married couple with an overall estate (house, savings, investments etc) worth over £1million, are likely to be exposed to inheritance tax upon their sad demise.
 
It may seem that £1million is a big number to a lot of our younger clients, but the reality is that many 60-year-old plus clients have houses that are worth £1million alone. This can often kind of happen by accident, where the family home was bought 40 years ago, the mortgage was paid off when the couple were in their late 40s and the area has blossomed into a rather desirable location.
 
Anyhoo, everything above the £1million mark will be subject to inheritance tax at 40%. For example, if you die with an estate of £2million, £400,000 of that money that you have worked hard for and squirrelled away for your long-term security, and that of your kids, will be handed straight over to the Her Majesty’s government. WTF!  
 
There are plenty of ways that you can avoid this happening. These include setting up Trusts, investing the money in specialist areas and a few other nuances that I will cover another time.
 
Yet the very best, simplest and MOST rewarding inheritance tax plan, is to spend your money AND ENJOY IT while you are still around to do so. Nuts, right?
 
The reason that most clients are fortunate enough to have got themselves into the position where they have an estate north of £1million, is because they have adopted good habits over the years: spending less than their income, saving in the right way and investing wisely. It may be that now is the time to discard some of those good habits that have served you so well for many decades AND actually start spending some of that hard-earned capital.
 
Think of it like this: every £10,000 you spend on a luxury holiday, on a new adventure, on eating out for the year, on gifting to your children, is actually at a year-round 40% discount. If you spend that extra £10,000 it is really only costing you £6,000… because otherwise the tax people are going to take that £4,000 for themselves.
 
If you need to know whether you can start spending more of your wealth or if you want to implement the best inheritance tax plan in the world, give us a shout.


Alfie Mullan, December 2019