However, you may not be aware that the amount of the nil rate band has not been increased since 2009, and may not be until 2015 at the earliest. With house prices rising again, the effect is to increase the amount of tax that estates are paying. This makes planning even more important. There is a common misconception that the only option to avoid IHT is to give assets away, either to individuals or a trust and many, understandably, do not want to do this. There are, however, other options where capital is not only controlled but also retained, while being exempt from IHT as long as certain conditions are met. Such investments are those that qualify for Business Property Relief (BPR), which has a 100% exemption. As long as the assets qualifying for the relief have been held for two full years and are still held on death, BPR should apply. One of the best known qualifying investments are the shares listed on the Alternative Investment Market (AIM).
Since the 5th August 2013 AIM shares can also be held in an ISA making them tax efficient during life as well as on death. Whilst investment in AIM may be towards the higher end of the risk scale and therefore generally suitable only for investors willing to accommodate a higher degree of risk, there are solutions that invest in tangible assets, such as forestry and farming, or that target capital preservation with a modest yield. In constructing an estate planning strategy a multi-faceted approach is often appropriate, taking into account risk tolerance, overall wealth, intended beneficiaries and the age and health of all concerned. No one solution is right for everyone and we frequently blend BPR qualifying investments to build a bespoke portfolio. If you are concerned about the potential effect of Inheritance Tax on your estate, please do contact us to discuss your options.
