Inheritance Tax
One of the greatest taxes of them all, in the UK, is the ‘tax on death’, that is inheritance tax (IHT). This is levelled at 40% of your estate, over your relevant allowances. For many, this is a big chunk of their children’s inheritance, plucked from beneath them and because of how quickly this must be paid, can create issues for the beneficiaries of your estate.
Understanding your allowances, how they can work in your favour and the rules around IHT, mean that in the later years of your life, action can be taken to reduce or even mitigate entirely, this tax.
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Trusts
This is a very complex area of estate planning in which we have substantial knowledge and experience. Trusts provide the potential to pass assets to your family, while retaining some control over the timing of their eventual receipt of the funds. This can potentially mitigate IHT and provide a multi-generational tool for future succession planning.
Gifts
Gifts are the number one way of mitigating against IHT but the rules on these are complex and people often find that they accidently gift too much or at the wrong time, which can then reincur IHT on the gifts given. The recipient will therefore have to stump up the 40% tax themselves.
It is often thought that gifts should be big lump sums in the last years of life, in a fleeting effort to get funds out of the estate. However, some of the most lucrative ways of gifting are on an annual basis and can actually reduce IHT substantially more over your lifetime, than if it were left until the last minute.
Business Property Relief (BPR)
This was a less common version of IHT relief but with the evolution of products and plans within this space, that provide a much more accessible and smart approach for investors, they have grown in popularity. Understanding these fully is often the difference between success and failure with these plans. Something that we do, with great effect.