What Inheritance Tax Planning Can Achieve

A financial advisor can provide you with information as to how you can reduce the money owed in taxes following your death

. That is why inheritance tax planning is so important. If you want to provide greater financial security for your family the inheritance tax planning is essential.

When someone dies, the estate that is left behind gets assessed to determine how much it is worth. Cash in bank accounts, businesses, property and other investments all get included in the analysis. Currently as of 2012, the inheritance tax threshold is 325,000 GBP per person.

IIf the value of the estate is more than this inheritance tax threshold as decided by the Chancellor, then a tax of 40 percent is applied to the value of any assets exceeding this amount. As of 2012 this threshold is set at 325,000 GBP. It can cost families a great deal of money when the value of the estate is well over this amount however there are a few ways you can minimise the amount of tax paid.

There are several reasons why inheritance tax planning is often ignored. A fear of considering the future is one of them, as is not wishing to appear money grabbing. Nonetheless inheritance tax planning is an absolute must if you are to minimise tax liability upon death. Whether you will be the one leaving the money or in the position of inheriting, making sure the necessary arrangements are in place will bring peace of mind and more financial security for the whole family. Due to the sharp increase of house prices in the UK over the past decade many more people are being affected by inheritance tax than ever before. Do not let yourself get caught out. Instead, take some steps to minimise the amount of tax paid.

There are a range of tax planning options open to you. For example, gifts are not subject to inheritance tax so long as they were received more than seven years before the death. This further heeds the advice that early planning of inheritance tax is a good idea. Charitable donations and donations to political parties are also not subject to inheritance tax and this is not affected by the seven year rule. These are just a few of the steps that you might choose to take as part of your inheritance tax planning strategy.

There is no doubt that inheritance tax planning can beis very important. The first step is to make sure you know exactly what your own financial situation is so you can make the right decisions. It can be extremely usefulis advisable to talk to a financial advisor so they look into your individual circumstances and be able to assess how much tax you are likely to owe. Once you know whether, or how much, inheritance tax will be owed you can plan for the futuremake arrangements to try and minimise it. The issue of inheritance tax is quite a complex area so it is definitely best tackled with the assistance of a professional.

A financial specialist will consider tax efficient wills, inheritance tax exemptions, gifts during your lifetime, life insurance, the use of trusts and normal expenditure out of income too when looking into ways to minimise inheritance tax. It is very important that you work with a reliable and independent company to ensure you are receiving unbiased and accurate advice. When it comes to dealing with financial matters it is always better to deal with an organisation who has no products of their own to sell as this can greatly influence the advice that is given. It is also vital that you deal with a company who doesn't adopt a one size fits all strategy to inheritance tax planning. It is a complex area and the circumstances of the specific individual are critical in determining the best course of action.

As well as talking to the experts you should try and read up on the subject area of inheritance tax planning yourself. There is plenty of information available online. By doing this you will gain the confidence to make decisions in relation to your finances and be in the best position to determine the best course of action.

Inheritance tax planning is a complex area but a very important one. By speaking with an independent financial advisor you will be able to see if and how your inheritance tax bill can be minimisedlegally reduced. Financial planning is a critical part of wealth management and the final step on this journey is inheritance tax planning. It should not be overlooked.

by: Sarah Shore

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