The number of over-45s seeking professional estate planning advice has risen sharply in the last year, with four in five claiming that the rules surrounding inheritance tax (IHT) are too complicated, according to Canada Life’s 2019 IHT Monitor.
The percentage of those who claimed that IHT rules were too confusing increased slightly this year, when compared to the 77% figure last year. At the same time, more than two fifths (42%) said they have sought professional estate planning advice, a sharp increase from the 32% of over-45s who said the same thing in 2018.
In January 2018, Chancellor Philip Hammond ordered a wide-ranging review of the IHT system by the Office of Tax Simplification to investigate whether the current rules create any distortions to taxpayer decisions. Hammond asked for proposals for simplification in order to ensure the system is fit for purpose.
However, the monitor revealed that, despite the increase in the number of over-45s seeking advice, a significant proportion are overestimating the size an estate needs to be for it to be worthwhile seeing a financial adviser.
Almost two thirds (64%) of over-45s believe they need assets with a value of more than £350,000 to see a financial adviser. Though, in reality, it is common for those with estates worth £250,000 or more to look for estate planning advice.
Instead of seeing a financial adviser, 30% of over-45s admitted they would take estate planning advice from their solicitor, while a fifth would seek advice from family and friends. When it comes to planning their estate, 28% are using their pension, 24% are using ISAs and a 20% are using a trust in their will.
Commenting, Canada Life senior technical manager Neil Jones said: “It is no surprise that the current inheritance tax rules are too complicated. The Chancellor’s review into the inheritance tax system is welcome, but his calls for simplification are long overdue.
“Despite the persistent confusion, it is encouraging to see a significant number of over-45s seeking financial advice, up from last year. While seeing your solicitor or asking friends and family for help with estate planning might be easier, the only way to properly cut through the red tape is to tap into the years of experience and expertise of a financial adviser.
“One of the most common misconceptions is that a person must have a certain estate size before it becomes worth their time consulting a financial adviser. In reality, people with estates valued at £250,000 would potentially benefit from seeking professional estate planning advice, just like those with more valuable estates.
“Of course, it’s not just about those who are giving the inheritance. Those who will inherit these estates also need to consider the impact on their own inheritance tax position.”
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