Where there is a will - there is a way to avoid UK inheritance tax.
Discretionary Trust Wills or Nil-Rate Band Discretionary Trust Wills work by making use of the Nil-Rate band (£285,000) of both spouses.
Leaving your entire estate to your spouse when you die will simply leave them with the burden of Inheritance Tax to pass on.
Leaving £285,000 worth of assets to your children, with the rest to a surviving spouse, would mean no Inheritance tax would be incurred on the assets passed both to your children and your spouse.
On the surviving spouse's death, they would leave all their property to the children again taking advantage of the £285,000 nil-rate band.
The risk of making use of the nil-rate band on the first partners death (by passing £285,000 of their estate to the children) is that the surviving spouse may be left without enough money. As the control of £285,000 of the estate would now be under the control of the children.
However, by the use of a Nil-Rate Band Discretionary Trust, the surviving spouse would be in control and allowed to draw from the children's assets.
This explanation should serve as a starting point for your research into this type of tax planning. Please seek professional help with Discretionary Trust Wills. Remember though to be legally valid a Will does not have to have been written by a Solicitor.
Use your Inheritance Tax Exemptions while you are alive
Give away up to £3,000 each tax year to your childen, taking advantage of your Annual Exemption. Don't forget to utilise any unused relief from a previous tax year.
Give gifts of up to £250 to different people each tax year.
Give to charities. Almost all donations will be exempt.
Give assets as wedding gifts to your children. Up to £5,000 to each child. Grandparents can give £2,500.
Potentially Exempt Transfer
Gifts given through your lifetime over and above the limits described above can be another way to reduce your Inheritance Tax Liability.
These gifts are known as 'potentially exempt transfers' and are free of inheritance tax if you live for at least seven years after making them. If you die before the seven years are up. The original gift will be included in your estate. However, any capital appreciation will not. Taper relief may be available in these circumstances.
Disclaimer: Always seek independent advice for any tax planning issues. Structured Internet Ltd cannot be held responsible for any costs incurred, transactions arising from or consequences of any advice listed here or followed as a result of visiting any site being linked from this website.
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