With property prices back on the rise, elderly homeowners are facing a dilemma that many couldn’t have imagined a decade ago: should they keep their home and risk paying more Inheritance Tax or sell up and downsize?
The answer could be neither.
In order to help pay for long-term care, the Treasury put a freeze on the Inheritance Tax threshold until 2019. This means that many homes which otherwise would have fallen beneath the threshold may soon find themselves in HMRC’s crosshairs.
So is it time to sell up? Maybe not.
We spoke to Paul Dodsworth from Estate Planning Solutions about this issue.
Paul said: “For many years, Inheritance Tax has been considered the curse of the super rich. But, with house and other property prices potentially rising by a quarter in the next four years, many average-income pensioners now find themselves contemplating death duties for the very first time”.
He added: “It’s important not to panic when it comes to death duties. While it can seem inevitable, there’s actually an awful lot you can do to minimise the risk and keep your wealth where it belongs: with your family”.
While selling your home now, before it increases in price, may help to keep you below the threshold, many homeowners are keen to pass on property to the next generation. While the property may increase in price, there are other assets which could be used to offset that increase, while keeping money within the family.
From investing in tax efficient products to making gifts and opening trust funds, there are many ways of sharing out an estate in advance, without sacrificing your home or losing income. And with a 7% increase in the number of people paying Inheritance Tax in the next 5 years, such planning will be increasingly sought after.
Paul concluded: “Overall, your estate is more than just bricks and mortar. If you can spread it, you’ll be able to protect it and pass on more than you might think. The main thing is to start planning as early as possible”.
Estate Planning Solutions write a blog on wealth management and preservation, including a short article on avoiding double death duty.
Take a look by clicking here.