Getting your affairs in order for when you pass away can bring real peace of mind as you get older. Failing to protect family wealth from Inheritance Tax could cost families thousands of pounds but there are various strategies and solutions to legally avoid or mitigate paying this tax.
Transferring of wealth from one family generation to the next
With careful planning it is possible to significantly reduce the need for your estate to pay Inheritance Tax. We spend a lifetime generating wealth and assets but not many of us ensure that it will be passed to the next generation – our children, grandchildren, nieces, nephews, and so on. Estate preservation planning is the transferring of wealth from one family generation to the next.
Owning a residence which you leave to direct descendants
The introduction of the ‘residence nil-rate band’ (RNRB) has made it easier for some individuals to pass on the family home. The rise in property prices throughout the UK means that even those with modest assets may exceed the £325,000 ‘nil-rate band’ (NRB) for Inheritance Tax.
If not exempt, an outright gift falls into one of two categories, depending the type of gift and to whom it’s made. These categories are Potentially Exempt Transfers (PETs) and Chargeable Lifetime Transfers (CLTs).
Passing wealth through the family, for most, is an important part of their estate preservation planning process. Pension funds are typically free of Inheritance Tax provided the scheme trustees/administrator has discretion over the payment of death benefits.
