What happens to your estate once you have passed on, is a sensitive issue, but planning for the inevitable is the best way to ensure that your wishes are carried out verbatim and that your assets are appropriated equitably.
Here are 5 tips on ways to reduce your Inheritance Tax bill.
- Get Your House in Order
The first step to take when planning how your estate will be managed is to make sure that your assets are in good shape. This means looking at how best to pass on any assets you have to a partner, family or friends.
Doing nothing may mean that you could pay 40% Inheritance Tax on some of your assets, but handled wisely, the assets could go where you want them to and with little taken away.
- Make a Gift
Using the services of financial planning experts like Tilney is an empowering experience that will serve to guide you on matters such as how and when is the best time to hand over your assets. For example, making a gift to your partner will not incur inheritance tax. Likewise, making a gift to a family member or friend will incur no tax if it is released to them more than seven years before your death.
- Set up a Trust
Legal counsel will also be beneficial if you are interested in setting up a trust. Assets put into trusts are sometimes exempt from inheritance tax and offer a useful way to help those you love the most. A trust could help pay for your grandchildren to go to university or to set up a home, but importantly you can specify how and when you want the money to be used..
- Life Insurance
Life insurance makes things much easier for those you leave behind, but needs to be paid into a trust if you are to avoid paying tax on the money it yields. Life insurance can also offer you peace of mind, knowing that any expenses can be covered without cost to family or friends.
- Donate to Charity
Leaving something to charity is a way of emboldening your legacy and can also provide some relief on inheritance tax. Leaving 10% of your assets to charity will reduce the percentage of inheritance tax on the remainder by 4% – going down from 40% to 36%.
This may not sound like a great deal, but if your estate involves a large amount of capital the 4% can be substantial.
You work hard for the money you accrue and so make sure that anything you leave works just as hard and for the right people.