How to avoid inheritance tax
More people than ever are liable for inheritance tax, deducted from their estate when they die. Avoiding this involves effective estate planning, to ensure that you make the most of your legacy and maximise the benefit to those you leave behind. This should include careful consideration about where and how you want to distribute your estate.
The following article highlights some of the ways in which you can limit the amount of inheritance tax you pay.
Do I have to pay inheritance tax?
First of all, it is important to establish whether or not you are required to pay inheritance tax on your estate. The threshold is currently set at £312,000 for single people, and £624,000 for couples, meaning that tax is only payable if the estate of the deceased exceeds this amount. This figure should include the sum total of all savings, investments, property and personal possessions. Calculating your IHT liability can be complex as you will need to take advice on what allowances can be carried forward from one estate to the next. The above is only a guide and specific advice should always be sought.
Writing a will
By writing a will you can establish your wishes and intentions for the distribution of your estate, and also make best use of your inheritance tax allowance. Rather than leaving all of their estate to relatives in a lump sum, many people choose to put money into trust, allowing their beneficiaries to get the full benefit of their legacy over time.
Housing
Most people’s biggest asset comes in the form of the home they live in. Historically, many people gave away their homes before they died, in order to avoid paying inheritance tax. However, the Government got wise to this and introduced a tax on those who were living rent-free in the home they previously owned.
There are, however, other ways of getting around inheritance tax on your home. For couples, registering as ‘tenants in common’ means that on death, your share of the home may be left to someone other than your partner, hence reducing the size of the estate.
Annual allowances
One of the most effective ways of avoiding inheritance tax is by making the most of your annual gift allowances. Currently, you can give away up to £3,000 a year tax-free, with unlimited gifts of up to £250 a person and payments of up to £5000 to newly married couples.
Spend it!
It may be a cliché, but the truth is that you really can’t take it with you. Why not treat yourself to that new car, home improvement or a holiday?
Trust Inheritance
Trust Inheritance are specialists in estate planning, and as such, have helped thousands of people across the U.K to reduce the burden of inheritance tax. Their team of professional will writers can help to advise you on the steps you can take in order to avoid paying an un-necessary amount of tax on your estate. To find out more about the range of services they offer, visit: http://www.trustinheritance.com.