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Inheritance Tax Planning

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Making plans to avoid paying Inheritance Tax is not illegal. There are a number of ways to reduce your potential liabilty which are perfectly within the law and acceptable to HM Revenue and Customs. Inheritance Tax (IHT) is payable at 40% on the net value of a person’s estate above £325,000 ( this is the current nil rate band). Any unused IHT allowance can be passed on to a surviving spouse or civil partner after your death. This means that the nil rate band available when the surviving partner dies will be increased by the proportion of the nil rate band that was unused.

Should you choose to use a Discounted Gift Trust as a way to reduce your liability this will immediately reduce the value of your estate, even if you die within seven years. If you survive for seven years it reduces your estate even further for IHT purposes. It also provides a method of taking regular withdrawals from the plan but keeping them held in trust and outside of your estate. It allows any remaining fund in the event of your death to be paid to your loved ones. This option is available for single people and couples.

Another option is a Gift and Loan Scheme, also known as Loan Schemes. These are a popular way of reducing your IHT liability without losing access to the capital. A trust is established and you loan the trust money. The trustees invest this capital and you reserve the right to have the loan paid back in full or have partial repayments. Any growth on the loan falls outside the value of the estate on death and the amount of loan not repaid on death forms part of the deceased’s estate. The main advantage of this scheme is that it adds further growth on the money outside of the estate.

Lee Young, Wills & Tax partner, says “Trusts and assets held within trusts are subject to taxation and advice should be sought before deciding which is best for you.”

For a free initial meeting please call 01202 499255 and Lee or a member of his team will be happy to discuss any questions you may have.