Inheritance tax: Brits urged to ‘save future heartbreak’ by taking action to cut tax bill | Personal Finances | Finance


Inheritance can be a complicated issue if people don’t take steps up front to make sure their affairs are in order, and the key document that is seen as the best way to do this is a last will and a will. Tomorrow marks the start of Free Wills Month, which offers Britons the chance to get free will service if they are over 55. There are a number of reasons why writing a will is a good idea, especially for those who want to make sure their family and friends are protected after they die.

However, inheritance tax is a particularly important issue. This is because the tax could cost individuals tens or even hundreds of thousands of pounds, so it is important to take preventative measures.

Emma Watson, head of financial planning at Rathbone Investment Management, explained the kind of steps the British can take and why these should be considered.

She said: “It’s hard to imagine let alone plan for a future you’re not in, but spending time now thinking about what you would like for your family can save them a lot of heartache. to come up.

“Of course, this kind of preparation does nothing to protect you against the worst, but it can ensure that if a disaster hits your family, they don’t have legal and financial problems at a time when they are the least. able to cope with them. “

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The financial expert shared some tips to help Britons sort out their financial affairs, avoid unnecessary taxes and make the process as smooth as possible, at a time that may already be difficult.

First, she said it’s important to consider protecting your family, especially dependents – that is, children or stepchildren under the age of 18. This is not just a monetary issue, and many people will want to put in place an arrangement to have custody of their children if they and their spouse suddenly pass away.

As this is such an important decision, Britons are encouraged to speak to the people they wish to appoint as guardians, and to ensure that this is reflected in a legally binding document, so that the decision does not is not left to the courts.

Second, protecting a partner could be key, especially if a person is not married. Under current law, unmarried couples are largely unprotected should a person die in terms of property, money and other assets. Thus, people are urged to ensure that their will reflects their last wishes in this regard.

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But a particularly significant issue that permeates estate planning is the inheritance tax, charged at 40 percent above a particular threshold on a deceased person’s estate.

Understandably, many people will want to avoid this levy whenever possible, and so there are key steps Ms Watson said Britons should consider taking to protect their heritage.

It is especially important to stay below the IHT threshold, as the zero rate bracket means that the first £ 325,000 of chargeable transfers are taxed at zero percent, and therefore are effectively tax exempt. However, to avoid tax above this limit, people can leave everything to a spouse, civil partner, or charity.

Individuals may also consider placing money in a trust, Ms. Watson added, which means they are no longer part of a person’s estate for IHT purposes.

However, the rules around trusts can often be complicated, and with the changes over the years, it’s important to be careful. If she was considering this option, Ms Watson ended by insisting on taking financial advice.

Peter Hamilton, Head of Market Engagement at Zurich UK, also gave an overview of inheritance tax, noting that the number of people paying the sum continues to increase.

He urged people to take this opportunity to tidy up their affairs and make sure they don’t pay anything unnecessarily.

Mr Hamilton said, “There are a number of ways to mitigate the IHT. From a lifetime gift to the creation of trusts. However, for many, having the funds available to pay the tax through an insurance policy can be an important and useful option.

“Having the funds available to pay tax on death could save your loved ones from having to sell the property or other illiquid assets at what might not be the most opportune time, just to do facing a tax obligation.

“If the IHT’s liability is funded, rather than reducing the value of the estate, executors and beneficiaries will be happy. “

Equally important, however, Mr. Hamilton stressed, was having a conversation with family and friends about IHT responsibilities.

Keeping the idea open and discussed, he suggested, could allow families to make effective IHT gifts by passing on assets while a person is still alive.

He concluded: “More and more people are considering passing on assets while they are still alive, helping to pay for household deposits, weddings, private education or university fees for grandchildren and in some cases. , helping to start businesses.

“Another alternative is for parents to maximize their personal use of all their assets during their lifetime, but to use a life insurance policy to preserve the gifts they would otherwise have given.

“Make sure you speak with your counselor and family regularly to make sure your will planning is up to date and evolving with your situation. This includes taking into account any changes in legislation. “

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