My top tips to mitigate IHT

Inheritance Tax (IHT) has come under the spotlight over the past few years, due largely to the continued rise in house prices. These days, you don’t have to be hugely wealthy to be affected by IHT. More people than ever before are calculating the value of their estates and finding they have a greater liability to IHT than they’d first thought. IHT can cost your estate thousands of pounds when you die; however, the good news is that expert planning can legitimately mitigate this tax, meaning you can pass on assets to your family as you’d intended.?

On the UK Personal Finance Show podcast this week I share some of my top tips to help reduce your IHT liability.

MAKE A GIFT EVERY YEAR

Don’t forget to maximise the use of your annual allowances; doing so can reduce the ultimate tax liability substantially.

PUT THINGS INTO TRUST

It’s worth considering putting some of your cash, investments or property into a trust, as there is then the potential for this to no longer form part of your estate for IHT purposes. So, for example, you could put money into a trust to pay for your grandchildren’s education, or to provide support for a relative, to ensure that these are provided for after your death.

LEAVE SOMETHING TO CHARITY

If the size of your estate means that IHT is likely to be payable, you can reduce the rate at which it is payable by leaving at least 10% of your net estate to charity. This would mean that the rate of tax?payable on the balance of the estate could be reduced from 40% to 36%.

TAKE OUT LIFE ASSURANCE

If you are concerned about the amount of IHT that may be payable on your estate, you could consider taking out a suitable life policy. Whilst it won’t reduce the amount of IHT that will be due on your estate, the payment from the policy could make it easier for your beneficiaries to pay the bill. You would need to have the policy written under trust to ensure that it doesn’t form part of your estate on your death. Payments of premiums are considered gifts for IHT unless they can be covered by one of the IHT exemptions.

TAKE PROFESSIONAL ADVICE

These days, many more estates are likely to be subject to IHT, so taking expert?advice could save your beneficiaries substantial amounts of tax. There are simple steps you can take to reduce the amount of tax due. For instance, it’s vital to have a valid Will in place; assets left to a surviving spouse or civil partner are free from IHT, but if you die without making a Will, not all of the estate will necessarily pass to the surviving spouse/civil partner. One thing is certain, if you feel that your estate is likely to be subject to IHT you should obtain in-depth professional advice that looks at all aspects of your requirements, lifestyle and goals and develops a financial strategy that meets your needs. If you could use some practical, no-nonsense advice, then please do get in touch.