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A Guide to Estate Planning for High-Net-Worth Individuals

by Byrne Anderson
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IHT for High-Net-Worth Individuals

As a high-net-worth individual, it’s important to acknowledge your wealth and take estate planning seriously. This involves thinking about how your assets will be preserved, managed and distributed after death and, when done properly, could save your beneficiaries a fortune on Inheritance Tax (IHT) payments. While Kent tax advisors are readily available to help with the finer details, you must understand the basics of asset management and how you can protect your family in the long run. With this in mind, here’s a quick yet essential guide to estate planning.

Calculate the Value of Your Estate

First things first, you must calculate the value of your estate. You should include the value of the following assets: your property, savings, investments, valuable possessions such as jewellery, art and cars, any other assets. Subtract the following to get an accurate estate value: debts, reasonable funeral expenses. When you have the final total, it’s important to know the nil rate threshold, which is currently £325,000. The value of your estate above this will be taxed at 40%.

Create a Cost-Effective Inheritance Tax Strategy

Only around four percent of estates in the UK are subject to IHT. Therefore, seeking professional advice is worthwhile as the average person won’t understand the intricacies of this kind of estate tax. As IHT specialist Nick Hughes explains, “IHT is essentially applied to estates valued at £325,000 and above, with anything over this amount subject to a 40% tax levy. As the implications of poor tax planning can be huge, creating a cost-effective tax strategy is essential.”

One of the most common ways to lower the value of your estate is through gifting. If you give assets away and survive at least seven years then all gifts are free and avoid inheritance tax. If you are married or in a civil partnership, you can also leave your entire estate to your partner without it being subject to inheritance tax.

Create a Will

Believe it or not, six in ten UK adults do not have a Will. This is shocking considering a Will gives you a voice beyond the grave and ensures your assets are divided according to your wishes. A Kent accountant for probate services can handle distribution of your wealth in line with the instructions in your Will, but for ultimate security you must write your financial requests officially as part of the wider estate planning process.

A Will is particularly important if you have a big estate as it’ll help to protect your loved ones and prevent long-term arguments among family members. While you can set up a Will by yourself and appoint executors to manage things once you’ve passed, many high-net-worth individuals prefer to seek professional help to ensure nothing is left to chance. It’s perfectly possible to write your will with IHT considerations in mind. This should relieve any kind of tax-related anxiety.

It’s never too early to get your estate in order and while the topic can be somewhat morbid, taking care of your assets now could save a lot of trouble down the line.

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