Death, Taxes and Estate Uncertainty - Private Client Solicitors

Death, Taxes and Estate Uncertainty

A week, it is said, is a long time in politics.

Much can change, both in terms of the careers of those in parliament and the policies which they promote.

Even allowing for the apparent speed with which priorities shift for individuals leading the Government, however, their deliberations about how to tackle issues of the day – or, more particularly, how they’re fed into the public domain via media briefings – do have lasting real world consequences.

Take, for instance, the continuing uncertainty surrounding Inheritance Tax (IHT).

The most recent figures provided by His Majesty’s Revenue and Customs (HMRC) show that IHT accounted for just over £7 billion of the entire tax which it received during the financial year that ended in April.

To put that in some context, it equates to one-third of one percent of Britain’s Gross Domestic Product (GDP).

Having said that, the amount of IHT paid from estates of those men and women who’ve died and have assets exceeding the £325,000 threshold at which it becomes payable has increased markedly in recent years – up 128 per cent, in fact, over the course of the last 10 years.

According to the Institute for Fiscal Studies (IFS), the proportion of estates generating an IHT liability is likely to increase still further – from four per cent to 12 per cent during the coming decade.

Numerous studies and articles in national media have made clear just how unpopular IHT is in certain quarters.

Unsurprisingly, politicians recognise how it might influence the way in which people vote come the next General Election.

Last September, there was feverish speculation that the Chancellor of the Exchequer, Jeremy Hunt, would reduce or even scrap IHT altogether.

He is only too well aware that a sizeable number of those who currently pay the tax come from parts of the country which are regarded as the Conservative Party heartlands.

One of the main reasons why is that the average house price in such areas, for instance, exceeds the IHT threshold. A detached house in London, for instance, costs more than £1 million.

As it turned out, Mr Hunt disappointed those hoping for an IHT cut in autumn. He hasn’t entirely dampened expectations of that happening, though, in the months to come.

In media interviews, he has described IHT as “pernicious”.

Yet even if IHT is ditched in the Budget due in early March, Labour leader Keir Starmer has pledged to reverse the move.

He believes that only wealthy individuals, more naturally disposed to vote Tory than for his party, would benefit.

It is all very confusing for those trying to make plans of greater duration than the average promise made during election year.

One of the true certainties of life is death and, given the importance not just of meeting any IHT bill but determining what happens to our assets and our loved ones after we pass away, it is of critical importance to make a will.

Quite often of late, myself and my colleagues throughout the legal profession have found ourselves dealing with individuals who recognise that fact and have drafted wills but not finalised them due to speculation about what might happen to IHT and how that could impact their own situations.

Only last week, one person specifically asked me whether it would be better to wait until after the Budget to put his will in place because of the chance that IHT will be reformed.

As I advised him, wills can and should only be prepared on the basis of the law as it stands.

Crystal ball-gazing has no part in the process and that’s important not only when we’re trying to assess the intentions of ministers of state but because none of us know exactly when we will die.

It is advisable to make a will as soon as possible. If the law or circumstances change, then wills can be revised relatively easily as the hard work will already have been done.

Better that than try to read the political future and face the complications which can arise as a result of intestacy.