Avoid
Inheritance Tax
There are three courses of action to take to avoid Inheritance Tax:
Step 1 - Draw up a Will ensuring it is written correctly to save the maximum amount of tax.
Step 2 - Transfer assets through the use of lifetime gifts.
Step 3 - Create an IHT-efficient fund to enable beneficiaries of an estate to meet the tax liability without disturbing family wealth.
The Will
Failure to make a Will sees your assets distributed according to intestacy rules.
- It is important to ensure any existing Will is up to date and Inheritance Tax efficient.
Lifetime Gifts
Gifting is an effective way to avoid Inheritance Tax liability.
Gifting some of your possessions directly to beneficiaries will remove that item from your estate. In this instance the gift must be absolute with you retaining no interest in it whatsoever.
Three types of Gift:
- Exempt Transfers - The Gift becomes exempt from Inheritance Tax on Death e.g transfers between spouses / civil partners or donations to charity.
- Potentially Exempt Transfers - The exemption applies if the Gift is given seven years before death.
- Chargeable Lifetime Transfers - Gifts into a discretionary trust which become immediately subject to IHT, where the gift exceeds the nil rate band, at a rate of 20%.
Trusts
A trust is a legal obligation called upon by a particular person (Trustee) to deal with someone's estate, in a particular way, for the benefit of the Beneficiaries.
Examples of reasons for setting up a trust:
- Passing money tax efficiently between generations thus avoid Inheritance Tax
- Providing a gift to a child but remaining in control of it until they are suitably responsible
- To reduce / avoid Inheritance Tax liability on the death benefits from pension plans & life assurance policies
 |
