‘Not exclusive to the super rich!’ Trusts could help reduce your inheritance tax bill
Inheritance planning is crucial to avoid facing a hefty tax bill, but recent figures have shown an alarming lack of people having firm plans in place. An unnecessary inheritance tax (IHT) bill could mean less being passed on to the intended recipients of someone’s estate.
Only 23 percent feel very confident in knowing how they will pass on any leftover assets to loved ones, according to abrdn’s ‘The Class of 2022’ report.
Just a third (30 percent) have had conversations with their partner about passing on their estate, while only 26 percent have spoken to their children about it.
Paris Drew at Kreston Reeves, spoke to Express.co.uk about how Britons could reduce their IHT bill through a trust.
She said: “Contrary to popular belief, trusts are not exclusive to the super rich.
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What is the purpose of the trust?
“Do you wish to mitigate your own inheritance tax? Are you looking to pass wealth down the generations? Do you need to provide for a vulnerable person?
Will the trust come into effect whilst you are living or upon death?
“If you need your assets during your lifetime then it may be advisable to have the trust drawn into your Will instead.”
Liz Ritchie, Partner at Mazars, urged Britons to consider making gifts during their lifetime as a way of reducing their IHT bill.
She said: “Lifetime gifts will be immediately exempt if they fall within the Annual Allowance (£3,000 per annum) or Small Gift (£250 per annum) exemptions.
“Those with a large disposable income will want to consider whether they can qualify for the Normal Expenditure out of Income exemption which has no limit.
“Larger lifetime gifts may also be appropriate as these fall out of account for IHT once the donor has survived for seven years from the date of the gift.
“Consideration of other taxes such as capital gains tax may also be relevant for gifts of certain assets.”
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