Planning ahead with taxes in mind

All gifts made more than seven years before your death are exempt! Forward planning can therefore assist greatly.

 

* Gifts to your husband or wife are exempt.

 

* Gifts of up to £3,000 in any one tax year are exempt

 

* Wedding gifts.

 

* Gifts that are part of your normal expenditure and made out of your income are exempt.

 

* Gifts to charities, museums and similar other bodies.

 

An alternative to an outright managed or staged gift is to set up a trust fund.

 

An advantage of this is that you can apply conditions to the release of the fund or parts of it, to match specific circumstances. Various other conditions, such as how the fund is to be used, can also be applied.

 

The best way to ensure you are minimising the amount of any possible Inheritance Tax is to see an IFA.

 

An IFA might, for example, advise you to make gifts now to intended beneficiaries as will be free of IHT (providing you live for 7 years or more following the gifts). There are several other tax-efficient ways of making annual gifts, both to individuals and organisations such as charities.

 

You could then leave a further amount free of IHT to your beneficiaries in your will. Gifts between married couples incidentally are not subject to any Inheritance Tax. You might also like to think about setting up a trust. If you put part of your estate into a trust for your grandchildren, it could be decades before your cash is again under the eye of the taxman. Trusts can be complicated and your IFA may work in conjunction with a solicitor.

 

Another option you might like to consider is an insurance policy to pay the tax bill after you die. Your IFA can compare all insurers to help find the right policy for you.

 

Some questions to ask your IFA about Inheritance Tax (IHT) Planning:

 

- Are there advantages in making grandchildren the main beneficiaries of my will?

- What is the Nil Rate Band?

- What is the IHT liability if I own property abroad?

- Can I “gift” my house to my children but remain living in the property?

- What are the rules relating to gifting personal effects?

- Is any IHT charged on the inheritance left to my partner?

- What are the IHT rules on "gifts within the 7-year period prior to death"?

- How do I set up a family trust?

- Can I really give away 3,000 each year free of IHT?

 

It is always worth using a qualified expert to address serious matters such as tax exposure. However, the following information may assist in some circumstances. Gifts are one of the most common methods use to reduce or avoid exposure to inheritance tax. The following points would be considered:

a range of steps can be taken to reduce this exposure, and cut the amount you are liable to pay. These vary depending upon when you initiate the process, and what sort of approach you wish to adopt.