Inheritance Tax Lawyer — Scotland

Inheritance Tax Planning

What is inheritance tax planning?

Inheritance Tax (IHT) is a tax levied on someone’s estate when they die. With correct planning, the payment of inheritance tax can be avoided altogether. Engaging in early inheritance tax planning ensures that your estate passes to beneficiaries and future generations in the most tax-efficient way.

Gifts made more than seven years before death will reduce the amount of tax payable, so planning for the future is a wise decision and can ensure that you are not leaving your friends and family to deal with a large tax liability, which will ultimately reduce their inheritance.

Spouses and registered civil partners are exempt from paying inheritance tax on assets passed to each other. This gives them a significant advantage in their estate planning. However, there is still a good deal of advice which a solicitor with knowledge and experience can offer to reduce tax for all clients whatever their circumstances and marital status.

Lifetime gifts and estates

You can reduce your taxable estate through lifetime gifting, a popular strategy for inheritance tax purposes. However, gifts made within seven years of death may still be subject to IHT. These are known as “Potentially Exempt Transfers” or “PETs”. Additionally, property gifting may incur capital gains tax (CGT) if it is not your main residence. This is something which can be overlooked without specialist advice.

It’s important to consider annual exemptions, such as the £3,000 annual allowance and other IHT reliefs.

The role of life insurance policies

Life insurance policies can be an effective way to cover inheritance tax payable, thus protecting your beneficiaries from financial burdens. By working with investment managers and inheritance tax solicitors, you can create a comprehensive plan that incorporates life insurance to protect your beneficiaries.

Charitable donations and IHT relief

This offers a tax-efficient way to reduce your inheritance tax bill. Gifts to UK-registered charities are entirely exempt from inheritance tax, and leaving at least 10% of your own estate to charity could reduce your overall IHT liability.

Planning for business owners

Business owners have an added layer of complexity when it comes to inheritance planning. There are specific circumstances to be met for certain assets to qualify for Business Property Relief, which can reduce their IHT bill.

Qualification is not automatic, however, and requires careful planning and documentation. A business asset, for example, cannot claim business relief if the asset is also eligible for agricultural property relief.

At Watermans, our inheritance tax planning solicitors can offer expert legal advice on navigating inheritance tax law.

Estate planning

Residence Nil-Rate Band (RNRB)

If your home or its value is closely inherited by certain beneficiaries, for example children and grandchildren, we can help you to structure your Will to ensure your estate benefits from all the available reliefs, including the Residence Nil-Rate Band.

It is very easy to lose out on this valuable relief if you fail to take proper advice on the wording of your Will. Currently, the Residence Nil-Rate Band allowance is £175,000.

Probate

Probate, otherwise referred to as a “confirmation” in Scotland, involves valuing an estate, paying debts, and distributing assets to beneficiaries according to a will. Inheritance tax planning manages your estate tax efficiently while protecting the next generation.

Gifting a Share in Property

You’re not obligated to gift an entire property, as transferring property shares is a much more effective way to reduce the taxable value of your estate. This strategy comes with some complexities, such as a formal declaration of trust.

Potentially Exempt Transfers (PETs)

Potentially Exempt Transfers (PETs) are gifts to an individual of unlimited value. If you make a gift and survive for more than seven years following this, the beneficiary will be exempt from paying inheritance tax on the gift.

However, if you survive for less than seven years after gifting, the value of this gift may be liable for inheritance tax. The amount of tax payable on this gift will vary, depending on how long you have survived after the transfer and the value of the gift itself. In Scotland, the amount of inheritance tax payable is based on a sliding scale, known as taper relief.

Your inheritance tax solicitor will be able to advise you further on this, specific to your own unique situation.

Capital gains tax considerations

CGT refers to tax that is paid on the amount you’ve gained after selling or disposing of your assets. Should you gift a property during your lifetime, this could be a CGT liability, especially if it’s not your main residence.

Inheritance Tax Allowances

What are my inheritance tax allowances?

Your estate will be exempt from paying inheritance tax if:

• the value of your estate is less than £325,000; or
• you leave your estate to your spouse, civil partner or a registered charity

There is now an additional tax relief band of up to £175,000 which is available where certain beneficiaries inherit your home or its value. This is a very complex area of tax law. Careful planning and care over the wording of your Will is necessary to make sure this valuable relief is not lost.

To ensure that you are making the most of the tax reliefs available to you, contact our dedicated private client team. Inheritance tax planning may seem like a complicated business, but that’s why we’re here to help. At Watermans, our specialist solicitors handle the legal stuff, so you don’t have to.

Do I Need a Solicitor?

Why do I need a solicitor to plan for inheritance tax?

The process involved in inheritance tax planning can be complicated. That’s why working with a solicitor who is experienced in handling inheritance tax planning issues could be in your best interests.

Using a solicitor ensures that everything to do with your will and estate is up to date and on the right track. Planning and arranging your estate will also give you peace of mind that your chosen beneficiaries will be looked after as you had wished.

Common Misunderstandings About Inheritan

Many people assume their estates are too small or need to be gifted to avoid an inheritance tax bill. Unfortunately, these assumptions can often lead to costly mistakes.

Even if your estate is below the current limitation, rising property values could push you into taxable territory. Similarly, taxes may still apply to gifts made within seven years of your death. Our inheritance tax solicitors have expertise in helping you understand and navigate these regulations, ensuring a flexible plan that adapts to your evolving needs.

Start your plan today

Estate planning may not be the most enjoyable planning to think about, but the benefits are undeniable. Not only does it protect your descendants, but it also ensures your wishes are followed exactly as intended.

At Watermans, we take the stress out of the process by providing straightforward specialist advice throughout the process.

Why Watermans?

Why should I choose Watermans as my IHT planning solicitor?

At Watermans, our solicitors are experts in advising on and drawing up Wills, and in helping you to plan for the future. Our team can advise you on all matters relating to inheritance tax planning and how best to ensure that your loved ones don’t have to deal with a tax liability when you are gone.

We specialise in making legal services look and feel easy so people can move forward in life. Everything we do is about providing straightforward, bespoke advice so that you can concentrate on the things that matter.