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Case study: stress-free tips for Inheritance Tax planning

HL financial adviser, Mufaddal Travadi, details the important things his client learnt when planning his mother’s estate and shares some tips to consider for Inheritance Tax planning.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

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 She hadn’t adjusted her will for around thirty years so a lot of the provisions were outdated.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.

Want to talk it through?

If you think you could be affected by IHT one thing is certain, the sooner you act the better placed you are to reduce the potential impact.

Our specialists can make sure you’re up to date and are making the most of your personal allowances.

The first step is to book a call with our advisory helpdesk, they won't provide you with personal advice on this initial call but will discuss how our advice service could help you. If this is something you wish to pursue we can talk you through the services we offer as well as the cost.

That way you can hang up either feeling confident you're already doing everything you can, or knowing that financial advice is available if you need it.

There's no obligation to take advice at this stage, but if you do, there will be a charge which we'll explain in advance.

If our advisory service isn't for you, we'll offer further information to help you make decisions for yourself – it's your call.

Book your call

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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