Inheritance Tax – Practical help

How to avoid Inheritance Tax

You can give away money, up to £3000 per person each year to reduce your liability.

• One of the benefits of marriage is that Inheritance Tax avoidance is easier as you get a special concession. You can also use the left over allowance of a deceased partner, which means you get the allowance doubled from the current £325,000 to £650,000.

• Inter Spousal Transfer: married couples can save up to 50% of the value of your property by putting in place a Deed of Gift of the debt created, to the children.

• Sharing Ownership: You can give part of your home to an “occupant” this might be a child, niece, nephew etc.

• For larger estates, over the threshold, say £650,000, there are other ways to avoid inheritance tax , depending on your circumstances.

Trusts

• A Discretionary Will Trust uses your Nil Rate Band to take out up to 50% of the value of your house. This can be used for your spouse or partners. It cant be used for singles or widows and widowers. If your partner has died in the last 2 years, you can implement a Deed of Variation to change a Will to make it tax efficient.

• Investment Trust: Gift up to £325,000 to a special type of Relevant Property Trust which then receives an income producing investment. The income can go to the giver. After 7 years, the gift can be excluded from inheritance tax.

• Pilot Trust: Several ways to set up during a persons life time to save Inheritance Tax for later generations.

• Lifetime Trust: Gift £325,000 to a Trust every 7 years, this can be repeated every 7 years. Each such gift is outside of the estate after 7 years.

Life Assurance

• Life Insurance can be used to pay the Inheritance Tax bill when you die. This covers the IHT liability however, it can be quite expensive so it is best used where other of the above methods have left a liability.