Here, Tristan Hartey offers some solutions for helping to reduce your beneficiaries’ potential Inheritance Tax bill.
1. Make a Will
Making a Will ensures your assets are distributed in accordance with your wishes. This is particularly important if you have a spouse or partner, as there is no IHT payable between the two of you, but there could be tax payable if you die intestate – without a Will – and assets end up going to other relatives.
2. Make use of trusts
Assets can be put in trust, thereby no longer forming part of the estate. There are many types of trust available, and they usually involve parents (called ‘settlors’) investing a sum of money into a trust.
The trust has to be set up with trustees – a suggested minimum of two – whose role is to ensure that on the death of the settlors, the investment is paid out according to the settlors’ wishes.
3. The income over expenditure rule
As well as putting lump sums into a trust, you can also make monthly contributions into certain savings or insurance policies (not Individual Savings Accounts) and put them in trust.
The monthly contributions are potentially subject to IHT, but if you can prove that these payments are not compromising your standard of living, they are exempt.
If you would like some more help and advice on Inheritance Tax head over to our financial guides page and look for our guide specifically on Inheritance Tax.