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Planning for inheritance tax needs to start early.
It’s a misnomer that inheritance tax planning needs to start in your later years. If you can see yourself accumulating wealth by virtue of the surplus income you have each month and the investments that you’re making today, at the very least you need upskilling on how your financial context exacerbates inheritance tax.
If you’re fortunate enough to benefit from Death In Service (DIS) via your employer, it could simply mean ensuring any payout is paid into a trust for the benefit of your family. Otherwise, your unmarried long-term partner and your children could be left with 40% less. If you’re married, then under current legislation, although there won’t be any immediate inheritance tax charged, the payout will add to your surviving spouse’s estate, and when they pass away, it will suffer inheritance tax upto 40% which could’ve otherwise been avoided.
Similarly, if you have a life insurance policy, you should be considering single life policies with a sum assured of upto £325,000 as opposed to policies with higher sums assured and structured as a Joint Life First Death (JLFD) policy.
You should be aware of gifting rules in the UK as most gifts are considered a Potentially Exempt Transfer (PET) meaning you need to survive 7 years from the date of the gift otherwise the value of the gift less any available allowances will be brought back into your estate for the calculation of any inheritance tax.
However, in circumstances where you have surplus income or a dependent relative you could reduce your inheritance tax exposure quite significantly.
Planning for inheritance is more effective the sooner you start, and it will positively impact several lifestyle and life planning decisions you make. Moreover, the sooner you start, the more straightforward any planning needs to be thus causing you far less disruption in later life.
We appreciate you’re looking at this page probably because you recognise you already have a problem; we’d advise you to book a call as there’s no simple answer.
You can download our popular “10 ways to reduce IHT guide” but it’s by no means exhaustive and may not be relevant to your personal situation.