Inheritance tax (IHT) is a tax that is levied on the estate of a deceased person before it is passed on to their heirs The current threshold for paying IHT is £325,000, and anything above this amount is taxed at a rate of 40% With rising property prices and inflation, many families are finding themselves liable to pay IHT, which can eat into the wealth that they have built up over their lifetime Therefore, it is essential to plan ahead to minimize the impact of IHT on your loved ones Here are the top 5 IHT planning advice to consider:
1 Make a Will:
The first step in IHT planning is to have a valid and up-to-date Will in place A Will is a legal document that sets out how you want your assets to be distributed after your death By making a Will, you can ensure that your estate is distributed according to your wishes and that your loved ones are taken care of It also allows you to take advantage of certain IHT reliefs and exemptions that are available for specific types of assets or gifts.
2 Consider Lifetime Gifts:
One effective way to reduce the value of your estate and therefore the amount of IHT that will be due on your death is to make lifetime gifts You can give away up to £3,000 worth of gifts each tax year without them being counted towards your estate for IHT purposes In addition to the annual exemption, there are several other exemptions available for specific types of gifts, such as gifts to charities, gifts to spouses or civil partners, and gifts for the maintenance of dependent relatives By taking advantage of these exemptions, you can reduce the value of your estate and the amount of IHT that will be payable.
3 iht planning advice. Utilize Trusts:
Trusts are a powerful estate planning tool that can be used to hold assets for the benefit of your beneficiaries during your lifetime and after your death By transferring assets into a trust, you can remove them from your estate for IHT purposes, while still retaining some control over how they are used There are several types of trusts available, each with its own rules and tax implications, so it is essential to seek professional advice to determine which type of trust is best suited to your circumstances.
4 Consider Business Relief:
If you own a business or shares in a trading company, you may be eligible for Business Relief, which allows certain types of business assets to be passed on free from IHT To qualify for Business Relief, you must have owned the business or shares for at least two years before your death, and the business must be trading at the time of your death By taking advantage of Business Relief, you can ensure that your business can be passed on to the next generation without incurring a significant IHT liability.
5 Seek Professional Advice:
IHT planning can be a complex and challenging process, so it is crucial to seek professional advice from a qualified financial advisor or estate planner They can help you navigate the rules and regulations surrounding IHT, and tailor a plan that meets your specific needs and objectives A professional advisor can also help you take advantage of any available reliefs and exemptions, and ensure that your plan is tax-efficient and legally robust.
In conclusion, IHT planning is an essential part of estate planning, and by taking proactive steps to minimize the impact of IHT, you can ensure that your loved ones receive as much of your wealth as possible By making a Will, considering lifetime gifts, utilizing trusts, exploring Business Relief, and seeking professional advice, you can protect your estate and provide for your beneficiaries in the most tax-efficient way possible Planning ahead is key, so start your IHT planning today to secure a brighter financial future for your loved ones.