Reduce your estates tax bill
Avoiding inheritance tax, through inheritance tax planning

If your estate is large in size, inheritance tax could be payable after you pass away. There are ways of reducing your estates tax bill and avoiding inheritance tax, effectively increasing the amount passed on to your heirs, through inheritance planning. Here are some considerations:

  • The giving of gifts,
  • Leave your estate to your spouse,
  • Use property allowances,
  • Consider a ‘deed of variation’,
  • Leave money to a Charity,
  • Equity release and a life insurance policy are also other options. Advice should be sought through a specialist and we recommend you consult with an independent financial advisor.

For amounts given away in excess of £325,000 in the seven years prior to your death, the beneficiaries of these gifts will be subject to inheritance tax charges. The ‘seven year’ rule would be applied.

For any of these matters, including an inheritance tax specialist, and other matters relating to estate planning, please feel free to contact us for a free no obligation consultation

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Considerations in more detail:

The giving of gifts, exempt gifts allow you to give away £3,000 worth of gifts each tax year (6 April to 5 April), the annual exemption, (a gift can be money, property or possessions). Small gifts up to the value of £250 per person can be given during the tax year, assuming you have not used another exemption on the same person.

Leave your estate to your spouse, if your spouse passes away, they will inherit your unused personal Inheritance Tax (IHT) allowance, allowing them to pass on up to £325,000 more as part of the main IHT allowance. The setting up of a Trust can assist with this.

There is also the residence nil rate band (RNRB) to be considered, increasing the threshold, but likewise, lifetime gifts made within seven years of death could attract an IHT charge if the estate is large in size.

Use property allowances, if you are leaving your estate to children or grandchildren, the new property allowances can let you leave more of your home before tax is due. The setting up of a Trust can assist with this. ‘Life Interest Trusts’ are attractive because of their tax advantages, as the Trust does not form part of the beneficiaries estate’ Please contact us to find out more.

Consider a ‘deed of variation’, this allows your heirs to alter your Will after death so that, for example, part of the inheritance is re-directed to someone else. They can draw up a deed of variation within two years of your death, however all affected beneficiaries under the Will must agree to the variation – not quite so simple.

Leave money to a Charity, any money you leave to a UK registered Charity would be free from inheritance tax.  There can also be tax advantages on the inheritance tax rate applied to your estate, these are subject to ‘terms’.

Equity release and a life insurance policy are also other options. Advice should be sought through a specialist and we recommend you consult with an independent financial advisor.

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