Reducing inheritance tax though planning

In April 2023, it was found that 42% of UK adults had overlooked planning their estate distribution, putting beneficiaries at risk of substantial inheritance taxes. To maximize inheritances and minimize tax liabilities, consider these strategic planning measures when drafting a will:

  • Exempt Beneficiaries: Designating the entire estate to a spouse or civil partner can potentially exempt the inheritance from taxation. Similarly, charitable donations on death are typically exempt, with higher exemptions leading to lower IHT charges.
  • Exempt Transfers: Establishing a bare trust for minor children safeguards their interests and reduces IHT charges by excluding assets from the estate calculation.
  • Life Policies: Placing life insurance policies in trust excludes payouts from estate calculations, ensuring beneficiaries receive the intended benefits.
  • Reduction in Tax Charge: Skipping a generation in will beneficiaries can prevent double IHT charges. While naming direct descendants as beneficiaries of a residence can qualify for Residence Nil-Rate Band deductions, reducing tax burdens.
  • Investments for Tax Relief: Investing in eligible shares and securities may qualify for Business Property Relief. P0tentially eliminating or reducing tax charges.

Ensure the legal validity of these measures by drafting, signing, and witnessing the will while of sound mind and not under undue pressure.