Case study: stress-free tips for Inheritance Tax planning

Please note this article is not personal advice. Tax rules can change and their benefits depend on your circumstances.

Most clients that approach me about Inheritance Tax (IHT) planning do so to create a plan that helps them pass on as much wealth to their loved ones as possible when the time comes. But planning ahead isn’t just about saving your loved ones tax and maximising their inheritance. It’s also about saving a lot of time and stress.

I recently spoke to one of my clients about his experience when he sadly lost his mother unexpectedly. He hadn’t really thought about wills and probate before this but had to learn on his feet.

He quickly realised that the administration of his mother’s estate was no simple task. She hadn’t adjusted her will for around thirty years so a lot of the provisions were outdated.

My tip – Although we don’t provide will writing at HL, Having a will is the cornerstone of every estate plan but it’s not just about creating one, it’s also making sure that it’s reviewed every 2-5 years and after big life events.

My client faced inheritance tax on the balance of his mother’s estate, along with gifts that were made to him within the last 7 years before her passing.

The total tax bill paid to HMRC was £176,000 of which £36,000 was apportioned to the gift his mother gave him to put a deposit on his first house.

He also mentioned that his parents worked hard to accumulate this money and have paid tax all their lives. The last thing they would’ve wanted is to pay more tax.

My tip – Remember most gifts remain in your estate for up to 7 years.

But it wasn’t just the financial turmoil my client dealt with during this time.

I wanted to acknowledge the emotional impact of inheritance tax, and of his family. He mentioned that it was a “very unpleasant experience” and also commented that the experience affected his mental health, increased stress and he also suffered with lack of sleep.

He spent around 5-10 hours per week dealing with correspondence from the trustees of the will and trying to obtain probate. He eventually gained probate 2 years after his mother’s death.

As an adviser, it’s easy to see the monetary benefits of inheritance tax planning. However, what struck me about my client’s experience was the emotional and mental turmoil he went through. As a result of dealing with the estate, he suffered additional stress and anxiety, along with strain on his relationships both with immediate and wider family circles.

I asked him what tips he would give, in light of his experiences. He gave these suggestions:

1. Get the right advice from the right people
2. Act quickly to ‘get it done’
3. Review your position and stay on top of it.