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Family affair

As I enter the final years of my life, I am beginning to plan my financial affairs in terms of inheritance for my family. Can you please tell me what I need to bear in mind, particularly for my autistic son?

Due to the global recession, the fall in house prices and the new nil-band threshold for married or civil partnership couples, the number of estates paying inheritance tax or death tax at a rate of 40 per cent has halved over the last few years.

According to HMRC, 3 per cent of estates are faced with inheritance tax bills in the current tax year. In 2007, the number of estates subject to IHT was closer to 6 per cent.

The use of trusts has always been an excellent way to remove assets from your taxable estate. Even though in the Finance Act of 2006 there was an attack on UK domestic trusts resulting in an unattractive up-front tax charge, there are still benefits from trusts to ensure that your family’s assets are not squandered.

The assets will be held by your nominated trustees who will make decisions which are bound by the Trustee Act 2000, stating that they will act in the interests of the beneficiaries as a whole, not based on personal factors.

Opportunities still exist through trusts to provide for those that may need more protection, such as a vulnerable son. The trust used can be settled during your lifetime or in your will, to take effect on your death.

A discretionary trust may be suitable for its flexibility, an interest in possession trust will protect the capital and income or a bare trust that gives full access to the beneficiary could be used.

Once we have completed a full financial analysis and I can see where your assets are held and what your intentions are for your son and the rest of your family, we can work with your lawyers to draw up the most appropriate trust wording and a will and then we can appoint the trustees and executors.

You have a collection of tax-efficient investments within your portfolio such as Isas, National Savings, enterprise investment schemes and venture capital trusts.

It makes financial sense to maximise tax efficiency for income and capital gains tax but do be aware that many of these investments are not IHT-free.

There have been a few changes introduced to these tax-efficient investments in the 2009 Budget. As you are over 50, you can invest up to £10,200 in your Isa for this tax year from October 6, 2009 and there have been Budget improvements to venture capital trusts and enterprise investment schemes to relax the time limits concerning the employment of money by companies receiving investments to two years or, if later, two years from the commencement of the qualifying activity.

To finish our meeting, I will, as requested, make recommendations regarding the risk strategy and asset allocation of your portfolio to ensure your aims are met.

It may be useful for you and I to talk to other members of your family to discuss healthcare and estate planning concerns. This may be uncomfortable but initiating the conversation gives family members an opportunity to indicate their personal needs and wishes.

Kim North (kim@techand is founder of Technology and Technical


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