Inheritance Tax: How To Cut Your Bills By The Thousands With Trusts Personal Finances | Finance
On the UK Personal Finance Show podcast, financial expert Phil Anderson explained the steps he took towards retirement to make money for his family member efficient and tax-friendly. He said, âPart of the planning that I have done on my own is that I have various life insurance policies held in trusts.
âIt’s something that a financial planner can also help, but that’s all I did on my own. “
HM Revenue & Customs took a record Â£ 6bn in IHT last year, up more than Â£ 1bn in just 12 months.
Inheritance tax bills are treated differently if the assets are held in certain types of trusts and while not all trusts protect families from tax, there are cases where the IHT will be reduced.
If people put things in a trust, as long as certain conditions are met, those things no longer belong to them.
This means that when people die, their value will not normally be taken into account when developing the inheritance tax bill.
Instead, the money, investments, or property belong to the trust.
In other words, when property is held in trust, it does not belong to anyone’s estate for estate tax purposes.
Another potential benefit is that a trust is a way of maintaining control and protection of assets for the beneficiary.
A trust avoids handing over valuables, cash or investments when the beneficiaries are relatively young or vulnerable.
Trustees have a legal obligation to look after and manage the assets of the trust for the person who will benefit at the end of the trust.
When people create a trust, they decide the management rules.
For example, they might say that their children will not have access to their trust until they are 25 years old.
The HMRC recently released data showing that Â£ 3.1bn has been paid by families through the Inheritance Tax (IHT).
It was between April and September. This represents an increase of Â£ 700million from the same period in 2020.
Brits may want to consider speaking to a financial planner.
This is how they can avoid paying thousands of inheritance taxes once they die.