{"id":535,"date":"2011-08-29T11:08:47","date_gmt":"2011-08-29T10:08:47","guid":{"rendered":"http:\/\/jsrcharteredaccountants.com\/?p=535"},"modified":"2019-02-02T16:55:38","modified_gmt":"2019-02-02T16:55:38","slug":"inheritance-tax","status":"publish","type":"post","link":"https:\/\/jsrcharteredaccountants.com\/inheritance-tax","title":{"rendered":"Inheritance Tax"},"content":{"rendered":"
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Inheritance Tax is one of the most despised and potentially most expensive forms of taxation. The tiny number of individuals who make any effort to reduce their IHT burden is therefore surprising. Simple steps like making a will can drastically reduce an IHT bill, and require very little work. There are a number of ways in which you can cut your inheritance tax liability – but it is important that you act now.<\/div>\n

To find out whether or not IHT will actually affect you add up the value of all the assets in the estate – such as a house, possessions, money and investments – and deducting any debts held by you such as mortgages, including household bills and funeral expenses. Although Individual Savings Accounts and Personal Equity Plans are not taxable during your lifetime, the assets included in these ARE liable for inheritance tax.\u00a0\u00a0If the total value of your taxable assets exceeds the Nil-Rate Band, which is currently set at \u00a3325,000, then you should be taking action to minimise your IHT liability.\u00a0It is therefore very wise to write a will, something we should all do regardless but it is particularly important in reducing an inheritance tax liability. Having a will in place can avoid leaving all your assets to the mercy of intestacy laws.<\/p>\n

Reducing the Estate<\/span><\/h2>\n

One of the ways in which you can limit your liability is to reduce the total size of your estate. There are numerous ways of doing this. Many individuals choose to give gifts to family and friends in life rather than writing them into their will gradually reducing their estate. You may wish to think about downsizing your home in order to reduce the size of your property assets. If this is not realistic, you may also consider an equity release scheme – this will free up some immediate cash, which may be vital in retirement, and will again reduce the size of your estate.<\/p>\n

Trusts<\/span><\/h2>\n

More commonly individuals are now turning towards trusts as an effective way of limiting their tax liabilities. Using a discretionary trust you can pass assets on to trust-holders, who are legally charged with looking after them until your death. At this point they will be passed on to your intended beneficiary. This can be an excellent way of pre-empting IHT but of also retaining your ability to determine who benefits from your estate.<\/p>\n

However money given away before you die is still usually counted as part of your estate, hence subject to Inheritance Tax, if you die within seven years of giving the gift.<\/p>\n

If you make large lifetime gifts, the beneficiaries could take out life insurance against the potential Inheritance Tax bill. Most gifts into trust are now subject to Inheritance Tax even if made during your lifetime, but this is an area where you would need specialist advice.<\/p>\n

However, even if you do die within seven years of making a gift, there is a range of other exemptions worth taking into account to help lessen the tax bill:<\/p>\n