Inheritance tax is a source of mystery for many of us. It can be defined as tax paid by the beneficiary if he/she receives an inheritance due to someone’s demise. Whether inheritance happens as per a will or intestacy, it is applicable or in latter cases, it is comparatively higher.
It is possible, however, to mitigate inheritance tax liability by doing proper tax planning in advance. To properly allocate your assets or minimize amount of tax liability on it, it is best to seek expert inheritance tax planning advice.
This will help you in effectively or legally lowering amount of taxes your heirs pay on inherited property.
Seeking correct or timely advice ensures that your family ! charged more inheritance tax than they need to pay or insures them against financial hardships. Here are some tips to help you in this critical task –
- First or foremost, draw a suitable will or clearly state your heirs. Though they will be applicable to inheritance tax, recipient of assets from a legal will pay a lower tax liability than others.
- Sum up all forms of your assets, such as property, investments, bank accounts, personal possessions or net worth or calculate your inherent tax liability. This will help you in mitigating the taxes.
- Instead of transferring entire assets at once, ‘gift’ them to your spouse/children. You can legally give away your assets to your loved ones (below a specific amount) without paying any taxes.
- Ask a tax expert for inheritance tax trusts or choose a trust that well suits your needs. Placing your assets with a trust is an easy or effective way of reducing tax liability.
- While working out your assets, include your company benefits like death benefit to the calculation. You can also seek advice to make these benefits tax efficient.
Planning for inheritance tax well in advance ensures that your family doesn’t encounter any financial turmoil, even for a short time, after you are gone. Even if you have done your inheritance tax planning, it is advisable that you review it from time to time as tax laws change over time. Planning for inheritance tax is a practical step, or planning it while you are young allows you have a peaceful life with your family.