Wills
Without a will, your estate is liable to the steep Inheritance Tax that prevents your loved ones from making the most of what you have left them and you also risk your estate falling into the wrong hands.
Many people assume that when they die their spouse will inherit everything they leave behind; however in reality, without a proper will in place, much of your estate will end up in the tax mans hands. There are a number of different ways to save on this dreaded tax and with a little planning and a good will; you can make sure your loved ones are the ones to benefit from your years of Contracting.
Gifts are not just for Christmas
If you start planning now for Inheritance Tax (IHT) then there are a wide variety of options available to you. You can make gifts to loved ones that are free from IHT as long as you make them at least seven years before you die and don’t retain any benefits. For example, if you wanted to gift away your house then you would not be able to continue living in the property unless you pay rental at the market rate. This method is therefore more suitable for gifting away money.
You are entitled to give up to £3,000 a year away without paying IHT and this applies to both spouses so in total a married couple can gift away £6,000 per tax year. On top of this you are entitled to give each of your children £5,000 when they marry and you can make gifts of up to £250 as often as you like.
Regular payments from your income are exempt as long as they do not affect your standard of living but as with all of the above gifts, it is important to keep a record of any payments made. It is a good idea to keep a file with details of any gifts made, including the dates, amounts and who they were gifted to. This will save any problems later on with IHT.
Set up trusts to protect your assets
A trust can be a useful tool in lowering your IHT liability without losing control of your estate. These can be helpful if your beneficiaries are very young or may be about to divorce and you need to protect the assets for them. It can also be useful if you are going into long term care as putting your assets into a trust prevents them from being counted when your liability for care costs are calculated.
If the assets are in a trust and therefore deemed to be outside of your estate then they cannot be considered when you are assessed for help with the costs of long term care and this can save your estate a fortune. As with gifts, trusts take seven years to leave your estate as far as IHT is concerned, but trustees are able to alter how the trusts assets are distributed and as such there is more control. There are also trusts that allow you to set them up to provide an income for you and others that enable some of the assets and any growth to be immediately classed as outside of your estate.
Your life insurance policy can also be put into trust which prevents it from being susceptible to IHT when it pays out on death. It is important that you ask for this when you set up your life insurance policy as unlike pension providers, many insurers will not automatically put your policy into trust.
Seek expert IHT advice
The variety of options available for IHT planning can be quite confusing and it is vital that you get it right in order to minimise the amount of your hard earned assets that can be stripped away by HMRC.
The expert advisers at Danbro Financial Services can help you to make the most of your IHT planning and ensure that your assets fall into the hands of your beneficiaries rather than those of the tax man.
To find out more call 01253 600140 or email chris.james@danbro.co.uk.
For further details, please contact Danbro for Umbrella Service: 01253 600141, General Enquiries: 01253 600140, London Office: 020 7836 8400 or email enquiries@danbro.co.uk or send an enquiry.
