Couple Cut £ 100,000 Inheritance Tax Bill to Zero – YOU Could Save A Fortune, Too | Personal Finances | Finance
The British hate the Inheritance Tax (IHT) with a vengeance, but that hasn’t stopped Chancellor Rishi Sunak from freezing the zero-rate bands until 2026, which will result in more Britons every year in the net . Yet, if you plan carefully, you can limit the damage to your family’s fortunes.
HM Revenue & Customs took a record £ 6bn in IHT last year, up more than £ 1bn in just 12 months.
Many fear Sunak will target IHT again in its October 27 fall budget and spending review, and tax experts are warning people to reduce their exposure if they fear getting caught.
Assets held in trust, such as property or stocks, are not part of your estate for IHT purposes, as long as you live seven years after placing them in trust.
Brighton couple Vic and Carole have created a trust to protect their family’s wealth from the IRS, and believe it’s the best thing they’ve done.
The couple, who have been married for over 60 years, paid a lump sum of £ 120,000 into an inheritance tax trust in 2006.
They used the WAY trust, which is a flexible family wealth protection plan. Their investment has now more than doubled to £ 246,000, and NONE of these will be subject to the IHT upon their death.
Vic, 82, a retired food sales manager, was so happy that in May 2013 he decided to invest an additional £ 102,000 in a second WAY trust. It also worked well, reaching £ 170,000 today.
All of that money has now fallen from their estate for inheritance tax purposes.
Vic believes this to be one of the best financial decisions he has ever made. “We have transferred a total of £ 222,000 into these two trusts and now have £ 416,000 available for our family, totally free from IHT.”
The couple have two children and five adult grandchildren, and Vic is delighted to have protected them from what he calls “the government’s IHT grab.”
READ MORE: The ‘right way’ to support family and reduce inheritance tax bills
A number of specialist advisers offer IHT planning services and you can choose from a range of different trusts with bare trusts being the simplest and discretionary gift trusts very popular.
Consumer champion Which one? whether a trust is just the right course of action depends on your personal situation.
With some trusts, you can pay an advance 20 percent tax charge upon set-up, if the money you pay exceeds the zero rate band of the IHT. The trustees will charge a fee to manage the trust, and there are other legal fees as well.
Don’t be blown away by the potential savings. First, check all the fees to assess whether the benefits outweigh the effort and expense.