It has been reported in the press that the post war baby boom generation will be the first to be wealthier than their children. There are many factors that have created this situation, particularly inflation in house prices. I’ve also been told that beer was about 10 pence a pint, how times have changed!

This does however lead to Inheritance tax issues as we begin to see wealthier parents who may have a reasonable main house, along with other assets wondering what to do with their assets when they pass away. If your whole estate is worth more than £325,000 when you die, then IHT of 40% is due. This doesn’t go very far given the average house prices.  The good news is that the government have introduced an additional main residence nil-rate band, which is currently £150,000. This can be used against the value of your main home only and it is due to increase to £175,000 in 2020, potentially giving each person £500,000 worth of allowances. Further good news is that these allowances can be transferred between spouses.

If you find yourself in the position of potentially paying IHT, then there are a few simple measures that can be taken, including making certain gifts. which will fall out of the estate immediately. Larger gifts need to be made 7 years prior to death (crystal ball anyone?) for them to be exempt. There are also rules around gifting assets you will still “enjoy” so I would not recommend gifting your main residence to your children, as this could lead to Capital Gains Tax as well as IHT, so really not a good idea!

This can be a complex topic, something worth investing some time into if you think you may end up leaving your children a 40% tax bill.