Financial advisers as well as beneficiaries need to be involved in the will writing process as the likelihood of estates becoming subject to inheritance tax increases according to a financial planning specialist.
Old Mutual Wealth’s Rachael Griffin said: “When people are making financial planning decisions, IHT needs to be taken into account and they need to be understood by the will-writer.
“With pension freedoms people may be releasing more equity from their pension and have more inheritance-taxable cash available.
“From the adviser’s perspective, they should be talking to their clients about their will and it is about making sure their clients understand the products and recommendations they are making and their ramifications.”
However, whilst more people become liable to pay inheritance and other such taxes, Rachael believes more and more people are becoming suspicious of legitimate means to minimise taxes.
According to Old Mutual Wealth, fifteen per cent of financial advisers report that clients have been put-off legitimate tax-planning over the last year because of negative publicity around tax evasion and aggressive tax avoidance.
Although the majority of advisers (84%) say their clients are still willing to make use of legitimate tax planning measures, a worrying number have seen a portion of their clients turn away from tax planning as a result of high-profile tax scandals.
Rachael said: “Efficient tax planning is good common sense and not something to be ashamed of. Those that save for the future and build wealth for themselves and their families should not be put off planning because others choose to abuse the system. But this data shows there is a real risk that normal people feel stigmatised or pressured to pay more tax than is necessary.
“Normal tax-planning tools such as trusts and potentially exempt transfers are permissible under UK tax law and there is no issue with using them to manage personal tax liabilities. The majority of these tools are designed to allow people to pass on their accumulated wealth to their children, grandchildren or other friends and family without giving almost half of it to the tax-man.”