Plan to legally save £100,000s on your estate …
Inheritance Tax can cost loved ones hundreds of thousands in the event of your death, yet it’s possible to legally avoid huge swathes of it, or possibly pay none at all.
The super-rich rarely pay IHT. Increasingly, the burden has fallen on the middle classes – especially those living in nice homes in the Ribble Valley.
What Happens If I Don’t Plan Ahead?
Your beneficiaries would be left with a large tax bill at the time of your death. However, with the advanced tax planning, you can help ensure that your family will actually benefit from your estate.
If you do nothing to mitigate your Inheritance Tax bill, HMRC could become the largest beneficiary of your estate.
How Can I Reduce My Inheritance Tax Bill?
There are a number of approaches we can help with in order to reduce your Inheritance Tax bill. Some can be complex and some may be more appropriate than others to your particular set of circumstances. This is why it is important to seek expert ax advice. Here are a few ideas:
1. Transfer your intended gift to your beneficiaries in a trust
This is useful if your beneficiaries are young and you don’t want them to inherit until they reach a certain age. You can also retain some control over your capital as they age or get married to safeguard family wealth from divorce.
2. Asset ownership
Ensure your assets are individually owned by your and your spouse up to the nil-rate bands. Thereby each individual can maximise the use of their nil-rate band and avoid going over the threshold limit.
3. Write a Tax Efficient Will
By putting a Tax Efficient Will in place and keeping it updated, you can ensure that your estate will pass on to those you want to.
4. Make cash gifts to family and members and use exemptions
You can give away cash or assets up to a total of £3,000 per tax year to family members without incurring Inheritance Tax.
5. Donate to family charities
There is no limit to how much and how often you can donate to charities, without incurring Inheritance tax. This could include setting up family charitable trust.
Case Study 1
Mr and Mrs Average have assets worth £1.25 million. They both die in 2021 and leave their entire estates to their children.
In the year 2020/21, their combines IHT allowances will total £1 million. Their estates will pay IHT on £250,000, resulting in an unnecessary tax bill £100,000.
However, if Mr and Mrs Average make tax–saving gifts before they die, have a Tax Efficient Will and a Trust in place, to protect the children’s gifts from divorce. these gifts are all immediately IHT-free.
As a result, no IHT will be due on their estates and the family wealth is also protected from relationship breakdowns.