Analysis of the UK’s IHT receipts suggests that the middle classes contribute to the majority of IHT receipts. This begs the question: is IHT preventing large-scale transfers of wealth or is it potentially taking money out of circulation that, according to Keynesian economic principles, stifles economic productivity?
IHT is a complex subject that will continue to be a point of debate for generations to come. And while there are merits in all of the above arguments, IHT is ultimately voluntary – there are many opportunities for individuals to reduce their IHT liability.
One such opportunity is the use of business relief. By investing in BR-qualifying propositions, individuals can protect wealth for their beneficiaries while benefiting the greater good by providing tangible social benefits. For example, certain BR propositions invest in renewable energy, lease assets to public organisations like the NHS or support SME growth.
One can assume that most individuals want the next generation to live in a clean world powered by renewable energy, while also ensuring their children and/or grandchildren can benefit from their inherited wealth.
Compared to other IHT planning tools, BR propositions are extremely straightforward, with the individual maintaining ownership of the assets and the assets being exempt from IHT after two years of holding (rather than the traditional seven years provided by other estate planning tools), as long as the assets are still held on death.
As long as individuals receive appropriate estate planning advice, IHT is a voluntary tax that can help achieve positive social change. Rather than being unfair, IHT therefore represents a significant opportunity for financial advisers and individuals alike.
Andrew Aldridge is chief marketing officer at Deepbridge Capital
(Photo by FT Montage)
