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Friday 7 November 2014
Friday 7 November 2014
Friday 7 November 2014
Friday 7 November 2014
Inheritance Tax (IHT) is often a contentious topic, but with the right planning, you can minimise its impact on your estate and ensure more of your wealth is passed on to your loved ones. While the Inland Revenue has increased scrutiny on tax evasion, legitimate tax planning remains an essential tool for families.
Understanding Inheritance Tax
Introduced in 1986, IHT currently includes a nil-rate personal allowance of £325,000 (or £650,000 for couples). This threshold has remained unchanged since April 2009. With rising house prices, an increasing number of estates risk exceeding this allowance, meaning more families will face an IHT bill.
Tips for Reducing Your Inheritance Tax Bill
1. Formalise Relationships
Marriage or civil partnerships allow couples to:
Pass assets between partners without IHT liability.
Combine unused portions of the nil-rate band. For example, if one partner uses only 50% of their allowance, the surviving partner can claim the remaining 50%, which scales with any future increase in the allowance.
2. Use Trusts Strategically
Life insurance policies placed into trusts can:
Exclude the payout from the taxable estate.
Provide quicker access to funds, bypassing probate delays.
Help loved ones cover immediate financial needs after bereavement.
Different types of trusts exist, so seek advice from a professional financial adviser to choose the right option for your circumstances.
3. Gift While You’re Alive
Gifting assets can reduce the taxable value of your estate. Key points to remember:
Gifts become exempt from IHT if the donor lives for seven years after making the gift.
Even if the donor passes away within seven years, the IHT liability may be reduced based on the time elapsed.
To qualify as a gift, the donor must relinquish all interest in the item gifted.
Annual gifting exemptions and other rules apply, so it’s important to plan carefully.
Why Seek Professional Financial Advice?
Navigating IHT rules and planning strategies can be complex. A professional financial adviser can:
Help you structure your estate to maximise exemptions and minimise tax.
Guide you through gifting, trusts, and other options to ensure your loved ones benefit as much as possible.
Provide peace of mind that your estate is being managed effectively.
Useful Resources
By planning ahead and using these strategies, you can reduce the impact of IHT and secure a brighter financial future for your loved ones.
Inheritance Tax (IHT) is often a contentious topic, but with the right planning, you can minimise its impact on your estate and ensure more of your wealth is passed on to your loved ones. While the Inland Revenue has increased scrutiny on tax evasion, legitimate tax planning remains an essential tool for families.
Understanding Inheritance Tax
Introduced in 1986, IHT currently includes a nil-rate personal allowance of £325,000 (or £650,000 for couples). This threshold has remained unchanged since April 2009. With rising house prices, an increasing number of estates risk exceeding this allowance, meaning more families will face an IHT bill.
Tips for Reducing Your Inheritance Tax Bill
1. Formalise Relationships
Marriage or civil partnerships allow couples to:
Pass assets between partners without IHT liability.
Combine unused portions of the nil-rate band. For example, if one partner uses only 50% of their allowance, the surviving partner can claim the remaining 50%, which scales with any future increase in the allowance.
2. Use Trusts Strategically
Life insurance policies placed into trusts can:
Exclude the payout from the taxable estate.
Provide quicker access to funds, bypassing probate delays.
Help loved ones cover immediate financial needs after bereavement.
Different types of trusts exist, so seek advice from a professional financial adviser to choose the right option for your circumstances.
3. Gift While You’re Alive
Gifting assets can reduce the taxable value of your estate. Key points to remember:
Gifts become exempt from IHT if the donor lives for seven years after making the gift.
Even if the donor passes away within seven years, the IHT liability may be reduced based on the time elapsed.
To qualify as a gift, the donor must relinquish all interest in the item gifted.
Annual gifting exemptions and other rules apply, so it’s important to plan carefully.
Why Seek Professional Financial Advice?
Navigating IHT rules and planning strategies can be complex. A professional financial adviser can:
Help you structure your estate to maximise exemptions and minimise tax.
Guide you through gifting, trusts, and other options to ensure your loved ones benefit as much as possible.
Provide peace of mind that your estate is being managed effectively.
Useful Resources
By planning ahead and using these strategies, you can reduce the impact of IHT and secure a brighter financial future for your loved ones.
