As if you don’t already have enough to worry about covering your day-to-day financial needs, you must also account for estate planning and inheritance issues, before departing. As well as concerns about your own estate, you may one day be involved in your mum or dad’s affairs, helping them prepare. In any case, the more information you have about estate planning, the better you’ll do getting ready for days ahead.
Saga recently shared a group of recommendations for reducing Inheritance Tax. Whether you use one or all of the insightful tips to cut tax, the following steps and strategies may help ease your inheritance tax burden.
Take No Action
In an effort to do the right thing, well-meaning Britons make financial preparations affecting their heirs. As it turns out, in many cases, the best course of action is inaction, allowing things to unfold without active intervention. That’s not to say you should turn your back on estate planning, only that Inheritance Tax (IHT) may not be worth losing sleep over, for most folks.
More than 90 per cent of survivors do not pay Inheritance Tax following the death of a family member. Of 581,000 deaths occurring in 2018/19, only 22,000 estates involved inheritance tax. That means your chance of generating inheritance tax with your estate is roughly one in twenty-six.
You can currently leave a family member more than £300,000 without facing in Inheritance Tax issues. And if you own your home and pass it to a child or grandchild, the allowance climbs another £150,000. Other special circumstances add further concessions, so many estates fall far below the values required to pay IHT.
Outlive Inheritance Tax
When you give gifts and live another seven years, beyond the gift date, the items are not subject to IHT. If you die within seven, but more than a few years after making gifts, the Inheritance Tax may qualify for reduction. An important distinction is made when you make gifts but continue to benefit from the gifts. Giving your house to a child, but continuing to live there is considered a Gift with Reservation of Benefit (GROB). In such cases, the value of the items in question becomes a part of your overall estate, cancelling the tax benefit.
Marry Your Partner
You’re allowed to leave everything to your spouse or civil partner, without paying Inheritance Tax. The move makes financial sense for couples worried about how their affairs might settle, without making it official. The rule applies to civil partnership, available for straight and same sex couples, as well as traditional unions.
Share Small Gifts
Giving away money is one way to avoid paying Inheritance Tax, but there are strict limitations on large gifts. To make the most of the allowance, you must also consider giving smaller gifts. You’re allowed to give £250 gifts to many people, if you want to. And you’re also permitted to make regular small payments to individuals, as long as sharing your surplus doesn’t diminish your own lifestyle. Payday loans are available online for family members needing quick cash, but small family gifts may provide cost-effective solutions, bridging spending gaps for loved ones, whilst cutting IHT at the same time.
Give Away the Maximum Amount
You can gift a total of £3,000 each year without Inheritance Tax worries. The amount can be split between multiple recipients, and if you don’t give away the maximum amount this year, you’re permitted to roll the balance into the next year, upping the maximum amount you can give away.
Utilise Life Insurance
Tax rules are complex in some cases, so you should consult insurers and estate experts for advice about life insurance. It may be possible to pay proceeds of a life insurance policy to a pre-established trust upon your death, leaving your designated heirs free of IHT.
Although Inheritance Tax impacts relatively few estates, you should consider IHT when planning for your heirs. These are only a few of the worthwhile strategies you can adopt today, in order to save money on Inheritance Tax tomorrow.