This article in the Financial Times looks at matters surrounding Inheritance Tax from an interesting perspective, suggesting that a more rapid societal shift towards individuals more actively facilitating a wider distribution of wealth would lead to less being paid in Inheritance Tax.

Indeed, this has some symmetry with one argument, which is often wheeled out in favour of some aspects of Inheritance Tax, that states that it might encourage wealthy individuals to mitigate their exposure via the timely passing of wealth down the generations to those who are more economically active, rather than saving their wealth into old age.

This argument says that these people are more likely to spend that money or take greater risks with its investment, thereby fuelling wider income distribution and prosperity via the multiplier effect theory (the theory that government spending intended to stimulate the economy causes increases in private spending, that additionally stimulates the economy). Hence, from an estate planning perspective, the longer prior to death that assets are passed down, the easier it is to mitigate Inheritance Tax exposure through the use of gifts (known as Potentially Exempt Transfers). Indeed, the charity exemption also exists to encourage the distribution of assets to charities, which thereafter provide a benefit to wider society.

Of course, wider political and economics factors, personal and family affairs, and indeed the complicated world of Inheritance Tax itself, are far more nuanced than a broad brush theory. There are numerous complex methods of mitigating tax beyond the simple use of Potentially Exempt Transfers, and indeed many traps and pitfalls which are easy to get stung by without careful planning. Indeed, factors surrounding internal family dynamics often trump considerations surrounding the mitigation of Inheritance Tax.

In any event, working with Inheritance Tax matters on a daily basis, I am always interested in perspectives on this tax, which is often central to individual and family decision making.