Inheritance tax planning requires careful consideration, and mistakes can lead to unnecessary tax liabilities or legal disputes. Here are some of the most common errors people make when planning their estate and how to avoid them.
1. Not making use of gifting allowances
Many people fail to utilise their annual £3,000 gifting allowance, missing an opportunity to reduce the taxable value of their estate over time.
2. Not considering the seven-year rule
Large gifts made within seven years of death can still be taxed at up to 40%, catching some beneficiaries off guard. Proper estate planning ensures that gifts are structured efficiently.
3. Failing to use the residence nil-rate band
Not structuring property inheritance correctly can result in families missing out on up to £175,000 in additional tax-free allowances.
4. Forgetting to update a will
An outdated will can lead to legal complications and disputes. Ensure wills are regularly reviewed and updated, especially when making major financial decisions.
5. Not checking mental capacity when making gifts or estate decisions
If someone making an estate decision lacks mental capacity, their will or gifts may later be challenged in court. This can lead to delays, legal costs, and even the reversal of financial transactions.
How TSF Assessments can help
A mental capacity assessment ensures that individuals intending to make gifts, estate plans, or financial transfers fully understand the decision being made. This helps to prevent legal challenges and safeguards the interests of both the individual and their beneficiaries.
At TSF Assessments, we offer expert assessments of mental capacity to ensure that an individual’s financial and estate decisions are legally sound. The assessment will consider the information relevant to the specific decision being made, and determine whether the individual is able to understand, retain, use and weigh and communicate that relevant information. A detailed report will then evidence whether the individual has capacity to make the specific decision. The report can then be used in the event of any future legal challenge. If you have concerns about a loved one’s ability to make inheritance-related decisions, contact us today for professional guidance.
