10 steps to protect your family from a potential Inheritance Tax bill
1. The main ways to avoid Inheritance Tax are to spend your money while you are alive or give it away.
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Funding a potential Inheritance Tax liability
After taking the appropriate steps to put in place an Inheritance Tax planning strategy, if there is still the potential likelihood of a liability on your estate or if you have made gifts which have created a potential liability for the recipients if you die within seven years, we can help you review how you could fund this liability in the most efficient way.
Trust solutions
Different trust solutions to managing your wealth
Some types of trust are treated differently for Inheritance Tax purposes.
Trusts
Helping you control and protect your assets
One of the most effective ways you can manage your estate planning is through setting up a trust. The structures into which you can transfer your assets can have lasting consequences for you and your family, so it is important that you obtain professional advice, as the right structures can protect assets and give your family lasting benefits.
Dying intestate
If there’s no valid will
When you die, your estate has to be distributed one way or another. If you have a will, your executors have to gain
a Grant of Probate in England & Wales or Northern Ireland (a Grant of Confirmation in Scotland). If there’s no valid will, or the named executors in the will are unwilling or unable to carry out their duties, a Grant of Letters of Administration is needed. This is known as ‘dying intestate’.
A will is the first step
Sharing out your estate
Planning your finances in advance should help you ensure that when you die, everything you own goes where you want it to. Making a will is the first step in ensuring that your estate is shared out exactly as you want it to be.
Living outside the UK
What happens when someone dies?
When someone living abroad dies, the rules for paying Inheritance Tax (IHT) usually depend on:
• How long they lived abroad
• Whether their assets (property, money and possessions) are in the UK or abroad
• If their assets in the UK are‘excluded assets’
• If their assets were put into a trust
Giving to charity
Reducing an Inheritance Tax – it’s good to give
A new rule began on 6 April 2012 that reduces the amount of Inheritance Tax due on an estate if at least 10% of the taxable amount is given to a charity – but not to one of the other exempt bodies, unless of course it is also a charity.
What a relief
Assets that pass on free of Inheritance Tax
Inheritance Tax reliefs allow some assets to be passed on free of Inheritance Tax or with a reduced bill.
Gifts
Small gifts that don’t create an Inheritance Tax liability
HM Revenue & Customs allows you to make a number of small gifts each year without creating an Inheritance Tax liability. Remember, each person has their own allowance, so the amount can be doubled if each spouse or registered civil partner uses their allowances.
