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Before you pass on, knowing where your inheritance goes will put you at peace. In fact, even those who’ll be receiving your gifts can take a breath as they don’t have to deal with added responsibilities. 

If you’re thinking of distributing your property and assets to your loved ones before you go, then it would help to consider arranging your inheritance tax (IHT) properly. Doing so will help you avoid having your money fall into the wrong hands while benefiting your inheritors to the fullest extent.

Keep reading below to find out some ways to help you with inheritance tax planning.

Write Down a Will

Many people in the UK often depart without leaving a will, so it’s hard to determine who their valuables belong to after they’re gone. While having a will doesn’t necessarily entail tax planning, it can still stand as proof of who gets to take over your estate.

If you leave in intestacy (dying without a will enforced), then it will be difficult to divide your assets correctly. This will make it even worse, as intestacy may even push for the payment of an IHT despite it not having been needed if a will were in place.

Create a Trust Fund

You can freely pass down your inheritance to your children. Still, if you’re worried about how they’ll manage independently or if they’re capable of the responsibility, you can consider making a trust fund. While the assets are transferred to them on your behalf, they still have no ownership over the gifts. 

A trust gives you the power to deduct some of your assets; however, take note that your beneficiary may have to pay for different taxes, so it’s essential to keep track of the process. Managing your capital gains tax is also necessary if you plan to present your assets to your kids in the future. 

Provide Potentially Exempt Transfers (PET) While It’s Still Early

Gifting your loved ones with your assets can exempt them from paying for an IHT. But in some cases, they will have to answer to a capital gains tax. The thing to remember is that if you continue to live for the next seven years after giving away your gifts, the IHT is waived.

If you don’t make it past the required number of years, it will become a failed PET and tax will still be applied. One way to achieve a successful PET is by offering your inheritance to children while you’re still healthy and able to improve the probability of eliminating taxes.

Offer Monetary Gifts

Another way to decrease the chances of leaving IHT to your inheritors is by offering your excess money as gifts. Given that you won’t run out of savings and you can still spend for yourself, monetary gifts can sometimes be more valuable than giving away your assets.

Once you decide to give away some of your income, as long as your lifestyle is still intact, the people who will receive it don’t have to deal with IHT. Another thing about monetary gifts is you don’t have to meet the standards of living for the next seven years for it to be valid.  

Conclusion

Handling your inheritance tax isn’t complicated; all you need to do is rely on the right financial adviser to help you avoid working all your life only for your assets to go to the government. Remember to consider writing a will, create a trust fund, provide PET, and offer monetary gifts to manage your IHT conveniently.

Are you looking for tax planning solutions in Cardiff, UK, to control your inheritance tax? Harry Robinson WM is committed to guiding you with your finances through wealth management services. We offer trust and estate planning, financial protection and insurance, and more. Get in touch with us today to start planning your future. 

*Will writing and Powers of Attorney involve the referral to a service that is separate and distinct to those offered by St. James's Place and along with Trusts are not regulated by the Financial Conduct Authority.