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  • Writer's pictureSteve Bish

Ten Tips For Inheritance Tax Planning

inheritance tax planning

In England and Wales, your estate may be liable to Inheritance Tax. In some instances, this could create a burden for families unprepared for it. Why not let S Bish Estate Planning help you along the way?

Our role as estate planning professionals is to help ensure that you mitigate tax where possible, and that you understand what could stand in the way of your estate passing where you wish, in full. As a business, we adhere to a strict Code of Conduct (through The Society of Will Writers), and our service demands that we have an understanding of our client's needs, which we obtain with a comprehensive, no-obligation estate review. In this article, we thought we’d share 10 of our top tips to help you with inheritance planning and these are some of the topics that we’ll cover and address in estate planning reviews.

Inheritance Tax Top Ten Tips

If you follow these tips, you can help ensure that your loved ones don't have to bear an unnecessary burden when you're gone.

1. Use trusts

2. Take advantage of spousal-exempt amounts

3. Consider making lifetime gifts

4. Make sure your estate is up to date

5. Understand the rules around foreign assets

6. Make use of Business Property Relief

7. Consider using Insurance Policies

8. Review your Will regularly

9. Make donations to charity to reduce IHT liability

10. Seek Professional Advice

#1 Make use of trusts to minimise your tax liability.

A trust is a legal structure that can help you ring fence assets.

When it comes to reducing your tax liability, there are rules and stipulations to ensure that they reduce the amount of inheritance tax owed and a basic example is that you’d have to survive for 7 years to ensure that the money settled into a trust falls outside of your estate for inheritance tax purposes.

#2 Take advantage of spousal exemption amounts.

To help reduce what tax you might pay, married couples and civil partners are allowed to transfer their assets between each other without any additional taxes on first death.

This spousal exemption amount will enable them to maximise their asset base for inheritance planning purposes by reducing or eliminating the need for taxation when passing on wealth at death.

#3 Consider making lifetime gifts.

This reduces the size of your estate and lifetime gifting is a valuable way to minimise taxes upon death as it reduces your estate's size and removes assets from potentially being subject to inheritance tax at a later date. It’s important to note that you’re only able to make certain sized gifts. During a consultation we can review this with you.

#4 Ensure that your estate plan is up to date.

Make sure that all assets are appropriately documented. The first step in creating an effective inheritance tax plan is ensuring that all your assets have been accurately reported. This helps us to plan for your inheritance tax liabilities and plan with you to ensure that your wishes are carried out. This includes physical or tangible items such as property, investments, and personal property, and non-physical considerations such as trusts and bank accounts. The better prepared you are with the documentation, the easier it will be for your executors when it comes time to declare assets upon death too.

#5 Understanding the rules around foreign assets and how they affect tax liability.

For those who own foreign assets or receive income from ‘outside the UK’, knowledge of how each jurisdiction's laws apply can help you plan accordingly when it comes time for inheritance planning and estate planning in general. In some cases, this may mean double taxation or complicated filing procedures. We can help and advise.

#6 Pay attention to business property relief when making calculations.

This is a very complicated area and your business assets might mean that you’re able to claim specific reliefs - particularly property based reliefs. This is something that we can discuss during a consultation.

#7 Use insurance policies as a way of protecting against liabilities or reducing their impact.

Policies can be used as an effective tool when dealing with inherited wealth since they allow families (or beneficiaries) to secure coverage against liabilities that might arise during ownership or management of an asset after its transfer following death. In addition, depending on the type of policy taken out, costs associated with insurance premiums may also be deducted from potential liability when calculating inheritance tax due upon death, which could help reduce what is owed overall.

#8 Review your Will regularly to ensure its accuracy and update it when necessary.

Reviewing your Will regularly and updating it when necessary is essential for inheritance planning. As circumstances change, the wording and clauses within your Will may need to be updated to ensure that it accurately reflects your wishes and intentions. Keeping your Will up-to-date also helps minimise any disputes between beneficiaries or potential heirs regarding what you have left behind and what your intentions were.

#9 Use giving to charities to reduce your IHT liability.

Another way to reduce your Inheritance Tax liability is to make provision for charities or other non-profit organisations. This has the impact that your IHT bill could be reduced from 40% to 36%. While this isn't always an option, depending on the size of the estate and its value, donating some assets can help lower the estate's tax burden while supporting a good cause.

#10 Seek professional advice.

Last but certainly not least, probably the most important and obvious of all. Understanding your options and making informed decisions about planning for Inheritance Tax in England and Wales can be challenging. Professional advice should always be sought.

Hopefully, these ten tips have been informative and helpful, although you may still have questions or need more advice. Either way, you should consult us. We have helped lots of families, so why not let us help you with a no-obligation chat, contact us today to find out more.

Steve Bish F.Inst.PA MSWW

March 2023



Very clear and helpful advice

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