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  • Bridgwater
  • Somerset
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Inheritance Tax Planning

Can I avoid IHT?

There are currently several ways that you can legally reduce or remove any IHT liability from your estate....

Gifts

By planning several years ahead and using gifts and exemptions, you can help ensure that your family’s inheritance goes to your loved ones, and not to the taxman.

There are two main ways of "gifting" your assets:

  1.  Exemptions;
     
     The following are some of the main exemptions :
     
    Transfers between spouses
     
    Annual gifts of up to an aggregate value of £3,000 in any one tax year
     
    Gifts from income
     
    Small gifts up to £250
     
    Gifts on marriage
     
    Gifts to charities & political parties

     

  2. Potentially Exempt Transfers - (PETS):
     
    Any gifts not covered by the above are called Potentially Exempt Transfers (PETs).
    The Seven Year Rule
     
     Any assets you "gift" to other people fall outside your estate after 7 years and are not subject to IHT.
     
    If you die before seven years have passed, the value, over the nil rate band, will be subject to IHT on a sliding scale. This ranges between the full amount, in the first three years, to 20% of the total bill, in year six.
    PETs are very useful in reducing IHT, but there are restrictions in the rules.
    Gifts must be outright and have 'no strings' attached to be eligible. For example, if you decided to give ownership of your house to your children, but continued to live there, without paying rent, this may be considered a 'gift with reservation'. In this case, your house would still be considered as part of your estate and subject to Inheritance Tax.

Trusts

What is a trust?

A Trust allows you transfer money out of your estate whilst still maintaining some control over what happens to it. As a 'donor', you can impose restrictions, such as when the money is released and how it can be spent.

The two key advantages of trusts are:

  1. Money held in trust is usually not included in IHT calculations.
  2. Money can be transferred to your loved ones more quickly after your death, as it will not usually be held up by probate.

Would I still have access to my money while I am alive?

This depends on which type of Trust you choose. If you maintain access to the money, this may still be considered to be inside your estate and therefore not IHT effective. The type of Trust you choose will depend on your needs and is best talked through with a qualified adviser.

Finding the right IHT solution for you

IHT planning can be very complex, and it is important to get it right. 

 

Any decisions made are dependent on:

  • Your personal circumstances
  • Current legislation  
  • Taxation rules
  •  We recommend that you seek professional advice from a Financial Adviser before taking any decisions.
  • IHT planning is a long-term undertaking & taxation rules change, so it's important that your plans are reviewed regularly.

We hope you have found this information useful, for further information please see our  Inheritance Tax Guide or give us a call.

Need help?...For a FREE initial discussion Fill out our enquiry form and we will be happy to answer any questions!! Alternatively, call us now on 01278 439494  

 

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