4 Ways to Minimise Inheritance Tax without Changing Your Will

Inheritance Tax may reduce the amount of your estate that goes to your beneficiaries. Because you want to make sure that your assets are passed on to your loved ones without them having to pay hefty taxes, estate planning is vital while you are still living. There are several ways to approach taxes relative to inheritance, and most of them won’t require you to change your will.

Below are four simple steps you can do to cut the cost of Inheritance Tax for your beneficiaries:

1. Draft a Will

When you fail to make a will, your assets will be distributed according to the state’s rules. Making a will is the first step to wise estate planning, as you get to have a say on how you wish to distribute your assets.

2. Give gifts

For those who are married or in a civil partnership, you can give anything you own to your spouse or partner. By law, your spouse doesn’t need to pay Inheritance Tax based on the gift’s value. However, do bear in mind that certain rules apply in specific cases, such as if your spouse is a foreigner or has a different citizenship.

You can also give gifts to family members and even friends. When you do so, the gift’s value will still be part of your estate as Inheritance Tax, but just for a specific amount of time—usually for only seven years. Say, for example, you give your children money, and you survive for another seven years. This amount will not be considered when calculating Inheritance Tax upon your passing. Therefore, you can opt to give staggering amounts every year and be exempted from the Inheritance Tax. These rules can be technical and complicated. Whenever you’re unsure about something, it is advisable to seek legal advice.

3. Create Trusts

Trust funds are not part of your estate relative to Inheritance Tax purposes. It is therefore wise to include your cash or properties into a trust fund. You can create trust funds anytime and include them in your will. Do remember, though, that you may need to pay other taxes related to trusts, including Capital Gains Tax. Trustees may also be required to pay Income Tax at a rate of up to 45%.

4. Donate to Charity

Charity donations are free from Inheritance Tax liabilities. If you leave at least 10% of your total assets to charity, the remaining Inheritance Tax will be cut down to 36% from 40%. This may not seem a lot, but it means you’ve donated money for a good cause, and your loved ones will still get more.

Indeed, you’ve worked hard to build your estate, and your loved ones should be able to enjoy it as you please. Consider the taxes to be paid for your assets, most especially Inheritance Tax, which will be paid by your beneficiaries upon your demise. Because there are certain legalities involved on case-to-case bases, it is always best to consult legal experts regarding your assets and will. Contact our team to help you with your financial journey.

At Innes Reid, we offer services that will help you plan your pensions, portfolio, taxes, mortgages, and more. Let us make life easier for you. Give us a call today!