How to Manage Inheritance Tax Liabilities
When it comes to inheritance, it pays to be savvy. Taking account of what you could pass on and seeking advice on the best and most tax efficient way to do this, is wise.
We often think of inheritance as a house. However, possessions and securities also play their part. Securities may include things such as a life policy, shares, investments or cash. Gifting these in trust rather than waiting for everything to be distributed after probate, can save time, worry, tax and offer peace of mind to those having to go through a difficult time.
The current inheritance tax threshold allowance is £325,000. After that, anything will be charged at 40%. Debts and funeral expenses are deducted. From April 2017 new rules bought in a transferable allowance of £150,000 applicable to those leaving their property to a family member. If you’re married or in a civil partnership, other rules may apply if you’re passing your estate to your partner.
Given that the average UK house price was £227,000 in March, it’s hardly surprising that Financial Planning Today stated the average inheritance tax bill is close to £200,000, a figure that has risen by £60,000 in the last five years.
Holding assets in trust and gifting cash are two ways to drastically reduce a future inheritance tax bill. Funds are released on death rather than the recipient having to wait for probate. These are considered to be outside the estate of the provider and so will not be assessed for inheritance tax.
According to ftadviser.com, ‘the most effective IHT planning takes place by gifting at least seven years before death.’ As we haven’t yet cracked the formula for predicting when we may expire, clearly the most sensible thing is to get to grips with the options. That’s where a chat with us may help clear up some of the complexities involved and help you protect your future heirs.