I found out the other day that Inheritance Tax used to be called Death Duty – sorry, I am an ignoramus for those who already knew this fact. I imagine they changed it due to the very morbid nature of the name.
Plus, why do you have a duty on your death? You’re dead. And from the perspective of an agnostic atheist like me, you’ll know nothing about the afterlife anyway. Seems pointless.
So surely, any duty, financial or otherwise, should be made whilst one is still alive?
But then I thought, they’re missing a trick here; they nearly had it right with Death Duty… well, the Duty part anyway. I think we would all react better to paying our duty, rather than paying tax? Tax is a terrible word that can make people feel they are being hard done by. Evidenced by the fact that people are constantly looking for ways to reduce - or avoid - their tax burden.
Duty derives from the late 1300s from the Anglo-French “duete”, meaning “owed, proper or just”. To me, it suggests an element of camaraderie, as if we must care and we must do right. It feels like a very British thing to do – you do your duty and you pay your duty. Simple.
So here’s a shout, how about we call Income Tax, Life Duty instead; Capital Gains Tax should be called Profit Share Duty and Inheritance Tax should be called… nothing actually. It shouldn’t exist.
That’s my view anyway. You pay enough Life Duty and plenty of Profit Share Duty, why should you let 40% of your estate go towards your Death Duty when it can be for your children's Life Duties?
There is a lot to consider with Inheritance Tax and the planning around it, far more than I care to cover today. But I do know that we help our clients stringently plan to manage their Life Duty, reduce their Profit Share Duty and ensure their wealth, at the end of their time left on this planet, is not seen as a big chunk of Death Duty, but is instead the enabler to a better life for their next generation.
Of course, that might not be what you want. Some of our clients think it is actually their duty to pay Her (Dear) Majesty's Revenue & Customs part of their estate in the event of their death, especially if they feel that their kids have “had enough already!”. However, we have other clients who, over their dead bodies (don’t excuse the pun cos I meant it) will pay a penny more in tax than they have to, least of all on their hard earned net worth come their demise.
Most are somewhere in the middle. We’re not here to judge. We just make sure your views and values are an integral part of your planning.
Alfie Mullan, October 2018