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Inheritance tax

publication date: Jan 18, 2007
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Most clients will be working hard throughout their lives to buy their home and build up savings, but without adequate planning in place they could easily see the ‘fruits of a lifetime’s labour being lost to the tax man, their local authority or someone else equally not of their choice. The need for clients to be mindful of the hidden impact from three major financial dangers facing all families in the UK today has never been greater - Inheritance Tax, Long Term Care Fees and Disinheritance. You don’t need to be wealthy to be affected by these issues. For most couples, simply owning their own home is enough for them to fall victim to the ‘wealth trap’. Approximately 70% of all Inheritance Tax collected is being paid unnecessarily and an average of 200 families every day seeing their parents’ home being sold to pay for their care needs.

The good news is that members of the NAEA are now able to offer their clients, both old and new, an exclusive member benefit service known as ‘Asset Angel’™. This service, which was formally launched at the NAEA Residential Sales Forum back in November 06, is to be rolled out to members throughout 2007. The service works by utilising advanced tax planning and asset protection methods, which are not only well established, but are totally accepted by Her Majesty’s Revenue and Customs.

John Varley, Chief Executive of the MoneyMarketplace Group (and its legal services subsidiary Collier Law Direct), provider of the ‘Asset Angel’ service says: “We are delighted to be working with the NAEA to further promote the awareness to couples of the need to plan. With some straightforward planning, all of these problems can be significantly reduced and for millions of couples, removed altogether. We urge all NAEA members to ensure that their clients don’t leave it too late and take action now, with the added peace of mind of a service provided by fully qualified and experienced Solicitors and regulated by The Law Society.”

Our Solicitors make sure that the correct legal documentation is put in place and in doing so are the ones who are legally responsible to your clients for any advice and also to the Law Society. By advising on the correct way for your clients to own their assets, we can save all couples up to £114,000 in potential future Inheritance Tax, whilst, sheltering the family home from a forced sale to pay for care fees and ensuring that only those whom your clients want to inherit from them will do so.”

“The really good news is that with the payment of a single fee, where the cost to benefit ratio is extremely low, all of this can be achieved without the need for your clients to give their assets away, tie them up or lose control of them at any point. We really believe there is no simpler, more cost effective or better all round solution”

Peter Bolton King, Chief Executive, NAEA said “The challenge is one of awareness, as most people do not realise the consequences of failing to plan against these financial perils. It is here where we believe our members can have a significant role to play. With every property sold for more than the Inheritance Tax Nil Rate Band (£285,000 2005/06), automatically incurring IHT liability, estate agents are well placed to identify the problem and provide a solution. Imagine the positive profile you would receive and the extra ‘listings’ you could win, by helping to remove your clients’ property from the IHT net.”

Charles Smailes, President, NAEA, comments: “It is important for people to feel secure in the knowledge that everything they have worked hard for over the years will be safely passed on to their children. Careful planning is the only way to do this.”

Why should your clients be so worried? Well for most families, if they make plans now then they don’t need to be worried at all. However, by failing to plan or worse still by thinking they have it covered when they don’t, the consequences can be far reaching.

Inheritance Tax (IHT)

The concept of taxing people ‘on death’ is not new and it is not restricted to the UK. When first introduced, IHT affected only the very wealthy and whilst it was considered a ‘rich man’s tax’, the same cannot be said now.

With house price inflation massively outstripping the government’s inheritance ‘tax free’ threshold, today around ten million households are potentially facing an inheritance tax problem, according to a recent survey. Over five million households in Great Britain are valued at more than the current IHT threshold of £285,000 and a further five million become liable when total household wealth is taken into account, giving a total of 4 in 10 (41%) or 10 million households with an estate liable for a 40% tax bill on their death – a figure which has increased by a third (34%) on last year. With the average UK detached home now valued at over £300,000, just owning the home you live in is often enough to create an IHT problem, without considering any other savings, property or assets. Most ordinary homeowners in the UK would not consider themselves to be ‘wealthy’, just ‘hard working’. It is for this reason why IHT is widely considered an unfair tax.

So what is the impact?

Each person is allowed to pass on up to £285,000 (06/07) on death ‘tax free’. Above which everything you own is taxed at a staggering 40% (UK highest rate of personal tax). Even if you have been a basic rate income tax payer all your life, you automatically become a 40% tax payer, when it comes to Inheritance Tax. The tax has to be paid before anyone can inherit, meaning your children only ever receive what is left after the ‘tax man’ has taken his share. If the bulk of your ‘estate’ is the home you live in, then often it is the ‘family home’ which has to be sold in order to pay the tax man’s bill.

How does it work?

In a typical family, when one parent dies all their assets are usually transferred free of tax to the remaining spouse; their ‘Tax Free’ allowance, however, does not transfer. Instead it is lost. This means that when the second parent dies and their children inherit from them, they effectively pass on two people’s assets, but only one person’s ‘Tax Free’ allowance. The ‘Asset Angel’ service addresses this problem, by making sure both ‘tax free’ allowances are fully utilised, hence creating a tax saving of up to £114,000 based upon current rates.

Long Term Care Fees

In the UK we have an ageing population. By 2040, the number of people over 64 in Britain is expected to grow from 9.5 million to 15 million. With advances in medical science, people are now living longer and often require some form of longterm residential care. In 1951 there were just 330 people in the UK aged over 100 years. By the year 2031, it is predicted that this figure will have grown to 36,000 and this increase helps to show the extent to which the shape of our population is changing. It is fair to expect that most of these 36,000 people will be requiring care in one form or another and will probably need such care a long time before they ever reach 100.

Whilst the Community Care Act currently ensures this care is provided, it also requires that the elderly must pay for their own care on a ‘means testing’ basis. The means test for receiving state funded care is not so straightforward, but broadly speaking if you require care and you have assets valued at more than £21,000 (including the home you live in), then you will have to pay 100% of your care costs. The only normal exception to this is if you have a condition which is deemed to be life threatening.

At an average weekly cost of around £500 it is easy to see why this care regularly needs to be funded through the forced sale of the ‘family home’. With an average of 200 homes every day being sold to pay for Long Term Care, most would agree that this is unfair. Especially when those who do not own their own home and have no other assets of notable value will have the cost of receiving care provided for them by the state.

So, with typical care costs approaching £30,000 per year, anyone spending a lengthy period of time in care could see this drain on their hard earned assets have an even greater impact than that of Inheritance Tax. Why should you lose your home in this way, when you don’t have to? With careful planning using the ‘Asset Angel’ service, your home can be protected.


In a typical family when the first parent dies, everything usually goes to the surviving parent. If they then remarry and die before their new partner, it is the new partner who inherits everything from the original couple. Any children of the original couple may receive nothing at all from either parent.

Similarly, in the UK, remarriage following divorce is still a popular event, despite the fact that we have one of the highest divorce rates in the world. Without any planning in place, the children of divorced parents where both have subsequently remarried stand at best a 50:50 chance of inheriting anything from their parents.

Without adequate advance planning, the original couple’s children can do nothing about either scenario! This is what we mean by disinheritance.

How do you offer this service to your clients?

MoneyMarketplace have arranged for differentiated access to the ‘Asset Angel’ service for all NAEA members at special rates. By becoming an agent for Asset Angel™, as a member of the NAEA you simply choose the level of involvement you require.

The Asset Angel™ service has been designed to provide varying levels of access for NAEA members, from being fully involved in the process to an arms length approach. Either way, you don’t need to be an expert in this field, to offer the service to your clients. Fully qualified Collier Law Solicitors are the ones giving the legal advice and are therefore legally responsible to your clients and to the Law Society. So long as you work to the guidelines provided there is no liability to you or your firm for any advice given to your clients.

Broadly, there are two levels of access:

Full Agent or Introducing Agent

Full Agent

We equip you with sufficient knowledge and support to enable you to develop your own in-house Asset Angel™ service. This approach is ideal to give an extra challenge and responsibility to Sales Negotiators, Property Listers and/or your Financial Services professionals.

We can provide Asset Angel™ to you at heavily discounted wholesale rates, which can be discounted even further with a five year licence. To cover your costs of providing the service to your clients, you decide at what level to set the fee margin above the wholesale rate to either generate a secondary income stream, or whether to build the scheme into your existing fee scale as an added value service.

Introducing Agent

If you don’t want to get as closely involved as you would by becoming a Full Agent, then you can offer the Asset Angel™ service as an introducer. MoneyMarketplace pay highly attractive procurement fees to all introducers, with the amounts varying based upon whether you Pro-actively or Passively introduce. To find out more go on-line at:

Click Estate Agency Services and then complete the on-line contact form or simply e-mail A member of the MoneyMarketplace executive team will be happy to discuss with you on a no obligation basis, the best way to make sure your clients do not miss out on Asset Angel™.