How to Avoid Inheritance Tax
Everyone wants to be able to avoid paying tax. Fortunately, there are many legal ways to do this when it comes to your inheritance tax bill as it is one of the most avoidable taxes there is – providing you know the ins and outs of how the system works.
One of the most common ways to avoid paying inheritance tax is to give away your assets and wealth gradually during your lifetime. These ‘gifts’ will be completely free from taxation, you can give loved ones their inheritance early, which in turn will mean they will not have to pay tax once you’ve gone. It’s a win-win situation for all involved.
Some people find that a lot of their assets and wealth are tied up in property, so there are no disposable cash ‘gifts’ to give away. If this is the case, you may want to look into equity release schemes. These schemes allow you to borrow money against the value of your home or sell part of your home at a reduced market rate but remain living there. The idea of these schemes is to allow you to free up cash which can then be passed on as cash gifts to your family. If you survive the cash gift by seven years, there will be no tax to pay so it is wise to consider your future plans early.
It is worthwhile considering equity release very carefully, however, as the value of your estate will be considerably lowered by the fact that you do not own all of your home any more. This means there may be less for your children and family members to inherit anyway. Make sure you see a specialist advisor before going down this route.
Other ideas that should be pursued if you want to avoid inheritance tax are insurance policies, deed of variation, and placing life insurance policies under trust. The latter is essential if you have a policy that you want your heirs to be able to take advantage of after your death. Policies under trust do not count towards your estate and can also be paid out before probate is granted, which will get money to your intended recipients sooner.