How to help your family to save a small fortune when you pass away?

When someone from our closest family dies, we have to deal not only with the grief but also with inheritance tax (IHT), unfortunately. It is a tax concerning the money, possessions, and property of the deceased one. People often feel confused after such a loss, and find it hard to follow the legal restrictions, so they often turn to companies like Probate Advance for help. It is definitely worth finding out if there is a way to avoid such an unpleasant situation as paying a tax on the estate you have inherited. For this reason, we have prepared some tips on how to do it. Check them out!

Let Your Spouse or Civil Partner Get the Estate

Keep in mind that if you leave your estate to your civil partner or spouse, they will be free from paying the tax. Thanks to including this statement in your will, your family will be able to save a lot of money. After your partner’s death, they will only have to deal with the unused personal allowance, which will make it possible for them to pass on even as much as £325,000 more as an element of the primary IHT allowance. In case your partner marries again, the personal allowances that have not been used can be summed up and passed on. However, remember that it is only allowed up to the value of one complete personal allowance.

Gift Your Money

You can effortlessly avoid paying inheritance tax – just by giving away your money when you are still alive. You can gift even as much as £3,000 every tax year, and this amount can be divided between many people. What is more, you can give £250 to others as many times as you want.

If a wedding is coming, you can transfer up to £1,000 and forget about IHT. Your children can get as much as £5,000, and your grandchildren are allowed to receive up to £2,500. You just need to bear in mind that wedding gifts need to be made before the ceremony, and the wedding has to go ahead because if it does not happen, they will be perceived as potentially exempt transfers.

Create a Will

One of the crucial aspects of estate planning is to make a proper will. In this way, you can be certain that your assets will be managed the way you wish. If you do not prepare such a document before your death, your assets will be divided in accordance with the intestacy rules and may require paying inheritance tax that could otherwise be easily avoided. Many people think that the main purpose of creating a will is to have an appropriate division of the assets, but in fact, its another significant function is to allow your family to save a lot of money.

Remember to Stay Below the IHT Threshold

The inheritance tax nil-rate band (so, in other words, the inheritance tax threshold) for individuals counts £325,000 for the tax year 2020/21. It can be transferred to a civil partner or spouse what will make a total nil rate band of £650,000 for a couple. The 2015 Summer Budget introduced a new “main residence transferable allowance,” which gradually raises from £100,000 in 2017 to £175,000 for a person by 2020/21, so people may avoid taxing with IHT on their property. Take into account that this amount of money must be added to the nil-rate IHT threshold.

Place Assets within a Trust

Take into consideration that assets that are put in a trust will not contribute to the value of your estate when you die, so you can avoid inheritance tax in this way as well. For instance, you can put assets into a trust on your children’s behalf when they become adults.

Donate to Charities

If you leave money to any charity that is registered in the United Kingdom, they will not contribute to inheritance tax either. The same rule applies to donations made for local sports clubs and political parties. Furthermore, provided that you let such an organisation gets over 10% of your taxable estate, the inheritance tax rate for the rest of your assets will decrease from 40% to 36%. Keep in mind that the 10% is only applicable to the size of your estate over the lifetime allowance.

All in all, there are quite a few ways to avoid paying inheritance tax, so if you want to save your family from additional worries and expenses when you pass away, take care of this issue while you are still with them!