Are you concerned about your estate having a high Inheritance Tax bill after you die? There’s a reason why it’s known in the industry as the ‘voluntary tax’; there’s many different ways you can reduce your threshold without being unlawful and save some money.
Inheritance Tax is currently payable at 40% on the value of your estate if the worth exceeds £325,000 after you die; with estate not just meaning the bricks and mortar of your property but other assets too such as savings or investments and even household goods and personal belongings. Here are some simple ways to reduce your Inheritance Tax bill before it’s too late:
Open a trust fund
A legal trust fund, whereby cash, investments or property is given to someone else, means that once any money or assets have been placed in such a trust, it no longer belongs to you – meaning it won’t count towards your Inheritance Tax bill. Let’s say you want to set aside some financial savings for your children or grandchildren after you’ve passed away: placing this cash in a trust will mean it won’t be taxable after your death. There are a range of trusts on the market including Bare Trusts, Discretionary Trusts and Mixed Trusts.
Gift to your spouse or partner
If you’re married or in a civil partnership, gifting money or possessions to your other half can mean it won’t be included in your estate when you die, meaning it won’t be taxed. It’s important to bear in mind that gifts will only be tax-free if they’re made seven years or more before you pass away; otherwise, Inheritance Tax will be applied. It’s up to you how much you give away but make sure you’re working with a reliable, professional solicitor to put everything into motion.
Leave to charity
As we recently discussed, leaving money to charity in your Will can have plenty of advantages, one of which is a reduction in tax. If you leave at least 10% of your estate to charity, your Inheritance Tax is cut by around 4%; it might not sound like a huge saving but based on an estate that’s worth, let’s say, £400,000, that’s a saving of up to £16,000.
Invest in life insurance
A good life insurance scheme won’t rid your estate of Inheritance Tax but having on set up could relieve your loved ones after your death. Paying monthly sums into a life insurance policy means that Inheritance Tax can be paid from the account after you die, saving your family the worry of having to stump up the cash. Just be sure to check your policy is written in trust, otherwise your family will end up having to pay tax on the pay-out.
Call Flackwoods Solicitors today
Flackwoods Solicitors can help with managing your Inheritance Tax and setting up relevant trusts. Call us on 01403 738777 or email email@example.com for more information.