How can I make use of IHT exemptions?
We can advise on making the best use of the available lifetime IHT exemptions, which include:
• £3,000 annual exemption
• normal expenditure gifts out of after tax income
• gifts in consideration of marriage (up to specified limits)
• gifts you make of up to £250 per person per annum
• gifts to charities
• gifts between spouses, facilitating equalisation of estates (special rules apply if one spouse is non-UK domiciled).
What are the benefits of a family trust for IHT purposes?
Through a family trust, you would be able to protect your estate in a number of ways from the full extent of IHT.
You can for example control what happens with your any life insurance payout and pension funds on your death.
You will also be able to avoid the trap of paying IHT twice when your estate is passed on from your beneficiaries.
And as private documents, trusts will not be made publically accessible, unlike probated wills.
Trusts can also assist in removing the likelihood of your estate being liable to Inheritance Tax twice.
How much IHT will I have to pay?
If you are unmarried or not in a civil partnership, and your total estate is worth
£325,000 or less, then no Inheritance Tax will be due. If the value is more than this threshold, it is likely there will be Inheritance Tax to pay, unless you have taken preventative measures to limit your liability.
For married or civil partners at the time the first spouse partner dies, provided the full estate is left to the surviving spouse, the whole estate is completely free of Inheritance Tax.
When the second partner dies, there will be no Inheritance Tax to pay if the total is £650,000 or less (ie 2 x £325,000 allowance). More than this and it is likely that there will be Inheritance Tax to pay by your heirs when the second spouse dies, unless tax planning measures have been taken.
What happens if I am living abroad?
We are specialists in overseas implications of IHT planning.
When someone living abroad dies, the rules for paying Inheritance Tax usually depend on how long they lived abroad, whether their assets (property, money and possessions) are in the UK or abroad, and if their assets in the UK are ‘excluded assets’.