Inheritance tax (IHT) has caught many out in recent years. Rising property prices have pushed the values of estates far beyond the tax threshold of £325,000 resulting in bereaved families being hit by unwelcome and surprise IHT bills.
To beat the taxman and minimise liabilities to your family get in touch.
There are steps you can take, however, to minimise how much your partner and family will pay in IHT once your estate changes hand. This post outlines the steps to take:
Increase the Inheritance Tax Threshold
There are a number of ways you can increase the tax threshold, putting your estate further out of reach from the IHT taxman.
There are a number of options to consider. If you are a widowed individual and have remarried you can redraft your will which may increase the tax threshold of IHT. It is also a good idea to seek financial planning advice on how you use your pension. Do you use it all to fund your retirement, or leave some to beneficiaries as part of your estate?
Consider ‘Gifting’ to Avoid IHT
Another way to avoid IHT for your beneficiaries is to give surplus money away, effectively reducing the size of your estate.
You can give away up to £3,000 per tax year as gifts without incurring any form of tax repercussions. This can be to individuals or to a trust if you want more controls on the money.
Lifetime charitable donations are also exempt from tax liabilities, and if you leave some of your estate to a charity then this reduces IHT payable.
Currently, if you leave at least 10% of your net estate (Total estate minus your nil rate band and exemptions) to charity, then HMRC will reduce the IHT tax rate from 40% to 36%.
If you give more than £3,000 away in a tax year, it only becomes tax exempt seven years after the gift was made.
Insuring Inheritance Tax Liabilities
It is possible to take out an insurance policy to pay for inheritance tax. There are in essence two types of insurance available. They are:
Whole of life assurance covers the inheritance tax liability. This works with a gifting strategy and pays out enough to cover the remaining IHT tax amount.
While term assurance covers the gifts that exceed the £3,000 threshold that you have paid within the last seven years.
Beating Inheritance Tax
To beat the taxman and minimise liabilities to your family get in touch. My award winning financial planning services will ensure you minimise your liabilities passing on the majority of your estate to the people that matter.
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Source: Morning Star