ALLOW YOUR LOVED ONES TO BENEFIT MORE FROM YOUR ACCUMULATED WEALTH

Effective planning minimises the burden of Inheritance Tax (IHT), allowing your loved ones to benefit more from your accumulated wealth. If the value of your estate is above the £325,000 threshold (2024/25 tax year), the part of your estate above it could be liable for tax at the rate of 40%.

Fortunately, various strategies can help manage this liability. These approaches range from straightforward methods, such as utilising IHT allowances, to more sophisticated methods, like establishing a company to hold your wealth and making your heirs the shareholders.

COUNTING TOWARDS YOUR ESTATE’S VALUE

You can pass a home to your spouse or registered civil partner when you die, and there’s no IHT to pay. Leaving the home to another person in your Will counts towards the estate’s value. However, the Residence Nil Rate Band (RNRB) can increase your tax-free threshold if you leave your home to your children or grandchildren. This includes stepchildren, adopted children and foster children, but not nieces, nephews or siblings. There is tapered withdrawal of the home allowance if your estate’s overall value exceeds £2 million.

One of the most common strategies involves giving away assets. By gifting money or assets, you enable your children, grandchildren, or others to benefit from your wealth during your lifetime, which can also reduce the portion of your estate subject to IHT. However, rules are in place to prevent you from entirely avoiding IHT through asset transfers.

PLANNING AHEAD FOR INHERITANCE TAX, WHERE TO BEGIN?

Start by utilising the IHT exemptions and allowances available to individuals with substantial and modest wealth. This foundational step can set the stage for more advanced planning strategies. You can significantly reduce IHT liabilities by understanding and utilising various exemptions and allowances.

You can give away up to £3,000 each year, carrying forward any unused allowance from the previous year. Additionally, you can gift £5,000 to a child on their marriage or £2,500 to a grandchild. These routine gifts are an effective way of reducing your estate’s value without incurring IHT.

/// CONTINUE READING THIS BLOG ON PAGE 34 – 35 (CLICK HERE)///

THIS ARTICLE DOES NOT CONSTITUTE TAX OR LEGAL ADVICE AND SHOULD NOT BE RELIED UPON AS SUCH. TAX TREATMENT DEPENDS ON THE INDIVIDUAL CIRCUMSTANCES OF EACH CLIENT AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. FOR GUIDANCE, SEEK PROFESSIONAL ADVICE.

THE FINANCIAL CONDUCT AUTHORITY DOESN’T REGULATE TRUST PLANNING AND MOST FORMS OF INHERITANCE TAX (IHT) PLANNING. SOME IHT PLANNING SOLUTIONS PUT YOUR MONEY AT RISK, AND YOU MAY GET BACK LESS THAN YOU INVESTED. IHT THRESHOLDS DEPEND ON INDIVIDUAL CIRCUMSTANCES AND THE LAW. TAX AND IHT RULES MAY CHANGE IN THE FUTURE.

THE VALUE OF YOUR INVESTMENTS CAN GO DOWN AS WELL AS UP, AND YOU COULD GET BACK LESS THAN YOU INVESTED.