Passing it on in the best way possible

Kindar Brown of Rathbones | Supplied

Too many high-net-worth individuals (HNWI) are putting inheritance planning on the back burner, according to Rathbones, an investment and wealth management firm.

Its research found that 31 per cent of HNWIs in Scotland want to pass on wealth, but have not put any plans in place on how they intend to do this. The same percentage have never spoken to their family about inheritance.However, the research also shows that a number of HNWIs have taken positive steps with their financial planning. Some examples: 58 per cent have made a Will, up from 27 per cent last year, just under a third have made financial gifts to loved ones, or will continue to do so; 27 per cent have met with a financial planner; 16 per cent have put their wealth into a Trust for loved ones, and 20 per cent have or plan to continue to make financial gifts to charity, or have established a legacy or foundation.

Kindar Brown, senior financial planner at Rathbones, says: “Making plans to pass on wealth is an essential part of responsible financial and personal management. It ensures that your legacy is handled in a way that reflects your intentions, provides for your loved ones, and maintains the harmony and financial stability of your family.

“Avoiding these important conversations for whatever reason could lead to disagreements and misunderstandings down the road and will not guarantee your inheritance plans are carried out as you wish.

“There is no time like the present, and bringing your family together to discuss your plans and wishes can be invaluable and provide you with peace of mind. Once made, make sure you reassess regularly to ensure your wishes remain suitable to yours and your family’s circumstances.”

Brown shares her tips for passing down your wealth...

Use annual exemptions - Everyone can gift up to £3,000 each tax year with no Inheritance Tax (IHT)implications, irrespective of when you pass away. If you haven’t made gifts the year prior, the unused £3,000 carries on to the next tax year, however, it does not carry on to the third year. Certain family members can also make gifts to a relative who is getting married or entering a civil partnership with no IHT implications.

“Giving more sizable amounts could incur a tax charge if you were to die within seven years,” says Brown.

Gift to charity - Anything left to charity is free of IHT. Additionally, if 10 per cent of your net estate is left to charity, the rate of IHT applicable on death is reduced to 36 per cent from 40 per cent on the rest of your estate, reducing the amount of tax paid. Brown adds: “Gifts of cash to charity made during your lifetime will also help reduce the IHT burden and – so long as you are a UK tax-payer – will usually qualify for 25 per cent gift aid on the amount donated.”

Put assets in a trust - Putting assets, such as cash, property, or investments, into a Trust can mean they are no longer part of your estate for IHT purposes. It can be an effective way to manage how and when your wealth is distributed. “However, the rules around trusts can be complex and have changed over the years, so make sure to seek advice if you’re considering this,” says Brown.

Seek proper advice - Tax laws and exemptions can be complex, so it’s wise to consult with a financial planner or tax adviser to ensure your gifting strategy aligns with current regulations and your overall wealth planning goals.