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Brits lack IHT awareness

10th November 2008 Print
Brits are failing to protect their wealth through effective tax planning, according to research from Zurich, the life insurer.

Zurich's analysis shows that nearly two thirds of Brits (64%) are unaware of the changes to the inheritance tax (IHT) nil rate band announced in October 2007. The introduction of the ‘transferable nil rate band' allows couples to more easily pass on more of their wealth to their beneficiaries free of IHT.

Worryingly, it seems that Brits are potentially missing out whatever their age, with seven out of ten (71%) of those aged 35-44yrs unaware of this. Equally surprisingly, nearly two thirds (65%) of those aged 45-54yrs are unaware of the ‘transferable nil rate band'. Furthermore, over half of those aged 55yrs (52%) and above weren't aware of the changes.

Commenting on the findings, Paul Wright, Investment Management Director, Business Development Director, Zurich UK Life, said: "Planning what will happen to your estate sounds like a depressing thought, but what is even more depressing is what your estate can be subject to if you don't start planning now. At best, a lack of knowledge can significantly slow down the distribution of assets, at worst it can mean assets not reaching those who you would want to receive them.

"The message is simple; effective inheritance planning is not just for the rich. If you want to make sure that your assets reach the people or charities you want them to go to, you need to start planning your inheritance. If you're not sure where to start, talk to a financial adviser and they will help you protect your estate and your family as well as saving you time and money."

It seems that Brits are also unaware of the ways in which they can mitigate any potential IHT liability through effective long term financial planning.

For example, for parents looking to provide for their children upon death, life assurance policies can be written in trust. By doing so, the lump sum payable on death will be free of inheritance tax and immediately available to the beneficiaries, such as your children. Yet Zurich's research shows that over eight of ten people (83%) are unaware of the tax rules surrounding trusts.

Similarly, for those looking to reduce the value of their estate, it is possible to give away assets as gifts whilst still alive, thus reducing the potential IHT liability payable on the estate of the deceased. Yet three quarters (80%) of Brits are unaware of the tax rules surrounding gifts.

Concludes Wright, "Clearly there are still many people who are not making the most of the various tax allowances available, despite the credit crunch. We would encourage people to take a more holistic approach to financial planning and seek financial advice to help protect their assets in the long term, as well as making their money work harder today."