Effective planning: Preliminary considerations

Some restructuring of the business, or group of businesses, may be possible to maximise the likelihood that 100% relief will be available up to the cap.

An accurate and up to date appraisal of the value of the business assets and of the wider estate should also be undertaken.

The options available to mitigate the increased IHT exposure can then be considered.

It is important to include in that consideration:

• The overall financial plan for meeting the current business owner’s long-term financial needs and aspirations and how that may be affected by giving away assets now.
• How any substantial lifetime gifts of business assets may affect the balance of distribution of the business owner’s overall estate as between all intended heirs, factoring in the destination of assets that will pass outside of the estate (such as pension death benefits and any insurance policy proceeds written in trust).
• Keeping pensions expressions of wish under review, given the separate rule change that will bring pensions savings within scope of IHT from 6 April 2027. In this context:

○ If the relevant legislation takes effect as drafted, then, from that date, expressions of wish favouring a surviving spouse or civil partner will likely become more prevalent to secure the spouse exemption for pension assets on first death.

○ There is also likely to be renewed interest in the use of so called ‘spousal by-pass trusts’, whereby a family trust is set up in lifetime as a receptacle for pension death benefits on first death with a view to mitigating the eventual inheritance tax exposure on the death of the survivor spouse or partner. There are a number of tax considerations to weigh up in this context meaning that specialist advice is key.