Do you have faith that your estate will be distributed to your loved ones when you pass away completely according to your wishes? Or will the taxman receive more money than is actually required?
Hearing that some of your money and possessions may be subject to Inheritance Tax (IHT) upon your passing often comes as a shock. Everything you own is subject to taxation. Savings, investments, real estate, and all of your possessions fall under this category. Although everyone should plan for this, people who own enterprises or have foreign assets should plan especially carefully.
Who pays inheritance tax?
The executor of the will is often the one who makes arrangements to pay the inheritance tax. In the absence of a will, this is the responsibility of the estate administrator. The monies in the estate or the proceeds from the sale of the assets may be used to pay IHT.
When do you pay inheritance tax?
In the UK, the inheritance tax rate is 40%, although there is a £325,000 allowance for each individual. This means that if the value of your estate is less than the nil-rate band, inheritance tax is not due. The inheritance tax that must be paid if you pass away with an estate worth £800,000 is equal to 40% of the difference between that amount and £325,000.
Steps to take when planning your inheritance tax
Planning for inheritance taxes will be influenced by your individual situation, the size of your estate, and the type of assets you possess. To start, assess the size of your estate and determine roughly how much tax you could owe upon passing. You can always use an inheritance tax calculator to accomplish this. Following completion of this, you can start making plans.
First Step: Write A Will
Writing a will is the first step in inheritance tax planning. This will specify where your property should go following your passing. You can properly plan it to save a significant amount of tax.
Gift money and assets
By making gifts to your loved ones while you’re still living, you might lower the overall worth of your estate. This can apply to any presents you receive in money or other valuable possessions you own.
Set up a trust
You can set up a trust so that a trustee is in charge of managing your asset for the benefit of your beneficiary. When the asset is given to your trustee, it ceases to be your property and is not included in your estate when you pass away. This may lower your estate’s total worth and spare you from paying inheritance tax.
Who can help you with inheritance tax planning?
If you feel like you’re ready to start inheritance tax planning, then talking to one of Suttons IFA advisers would be a great start. An adviser will be able to make sure that your will is up to date and that your loved ones can make the most out of your assets, by gifting and setting up a trust fund.