Top 5 Inheritance Tax Strategies to Remember

It’s no secret that inheritance tax is one of the major challenges facing affluent families today.

Unfortunately, this may mean that taxes could gobble up a significant portion of your hard-earned wealth if you don’t have a solid estate plan. The good news is that several strategies can help you minimise or even eliminate the estate tax burden on your family. In some cases, it may be possible to eliminate the inheritance tax liability. Here are some of the most effective strategies to keep in mind.

Seek professional advice.

While it can be tempting to try to handle everything yourself, the reality is that seeking professional financial advice is one of the best ways to ensure that your estate plan is effective. If you live in South West England, an excellent financial advisor in Bristol can help you minimise the amount of inheritance tax you owe and provide guidance on how to avoid probate. In addition, they can help you create a plan that considers your unique circumstances and ensures that your loved ones are taken care of in the way you want. So, if you’re serious about estate planning, seek out the help of a qualified financial advisor.

Make use of the annual exemption

The first £325,000 of your estate is exempt from inheritance tax, so it’s crucial to make full use of this allowance. This can be done by making financial gifts to loved ones regularly or using trusts to minimise the value of your estate.

Make use of exemptions and reliefs

Several reliefs and exemptions can reduce the amount of tax owed. The spouse exemption allows a surviving spouse to inherit all of the deceased’s property without paying any inheritance tax. The charitable giving exemption will enable individuals to donate a portion of their estate to a charity and receive a reduction in their inheritance tax bill. Finally, business property relief provides relief for certain types of business assets, such as shares in a family business or agricultural land. Taxpayers can significantly reduce their inheritance tax liability by taking advantage of these reliefs and exemptions.

Consider financial planning strategies

Regarding inheritance tax, several financial planning strategies can be used to reduce the amount you owe. One popular approach is to take out a life insurance policy and name your beneficiaries as the policy’s beneficiaries. Then, when you die, the death benefit will be paid directly to your loved ones, and inheritance tax will not be owed on the death benefit.

Another common strategy is to make contributions to a pension fund. This can effectively reduce the value of your estate, as pension assets are not subject to inheritance tax. Finally, another option is to set up a trust for your children. This can help to protect their inheritance from taxation, as long as the trust is structured correctly. With careful planning, you can minimise the inheritance tax you owe.

Review your financial situation regularly.

As your life changes, so too should your estate plan. Reviewing your financial situation regularly will help ensure that your plan is up to date and reflects your current wishes. This can be especially important if you have experienced a significant life event, such as getting married or having children. Regular reviews will also minimise the amount of inheritance tax you owe, as well as help you avoid probate.

Final thoughts

If you’re concerned about inheritance tax, it’s essential to seek professional financial advice. A financial advisor can help you understand the different strategies available to minimise the amount of tax you owe. They can also help you create an effective estate plan to protect your assets and your loved ones.