By Florence Pearce, Specialist Wills, Trusts and Probate Solicitor with AMD Solicitors.
It is arguable that Inheritance Tax should be the forgotten tax. Life is for living and, should you ‘live long and prosper’, some of your estate may be lost to the Revenue, but worrying about this could be a waste of the life you have. However, if you would be happier in the knowledge that as much of your hard-earned wealth as possible is passed on to the next generation, read on…
Inheritance Tax is currently charged at 40% on the value of your estate over £325,000. The good news is that most married couples can currently elect to use both the tax free bands on the death of the survivor. So, unless the combined estate exceeds £650,000, paying Inheritance Tax may be avoided.
Where the family resources exceed this sum, planning for Inheritance Tax may be worthwhile. Here are five options to consider:
1. Can assets pass to your heirs directly, without forming part of your estate? It may be possible for the benefits payable under insurance or pension policies, for example, to be put in trust to pass directly to your children. Assets that pass directly to your heirs may not be taken into account in the tax calculation.
2. Where there are comfortable levels of wealth, making lifetime gifts can help in reducing the tax bill. For example, using your annual exemption of £3,000, small gifts of no more than £250, and certain gifts made on marriage, are ignored for tax purposes. For larger gifts, there is usually no tax due if the gift is made more than 7 years before death, and the bill (on gifts totalling more than £325,000) will reduce on a sliding scale depending on the date of death within that period.
3. Some business and farming assets can be passed on without attracting Inheritance Tax, or attracting a lower rate. We can advise you on whether your assets could qualify for these reliefs.
4. Gifts to your spouse and to charity usually pass free of Inheritance Tax. In addition, where 10% of the estate is left to charity, the tax on the rest of the estate can be reduced to 36%. If you wish a charity to receive part of your estate, a carefully drafted Will can enable you to make use of this tax break.
5. Creating a trust under which assets are held for your heirs is another option to consider. Trusts and their implications for Inheritance Tax can be complex, so seeking specialist advice on this option is a must.
AMD Solicitors have a busy Private Client department, and our experienced specialist solicitors will be happy to go through the options for minimising Inheritance Tax with you.
So, if planning for Inheritance Tax is right for you, we can help.
Telephone 0117 9621205 or email email@example.com.
Information in this article is of general guidance only and can not be relied upon as advice in individual circumstances.
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