Exploring your trusts and other estate planning options enables you to detail your wishes regarding how you would like your estate to be managed so that your legacy can be passed onto the next generation in a tax-efficient way. Detailed below are a few things you should consider to ensure you are utilising your assets in the most efficient way.
Drafting a Will can help ensure that your estate is passed on in line with your wishes when you die. However, you will need to think about the Inheritance Tax (IHT) implications of passing on your legacy and plan ahead accordingly.
In England and Wales, each individual is entitled to a tax-free allowance of £325,000, above which estates will attract IHT at a rate of 40 per cent. Fortunately, there are various ways you can mitigate your IHT liability, such as by leaving money to a charity in your Will or passing property down to direct lineal descendants using the residence nil rate band (RNRB).
Individuals may want to control how assets are passed on through the generations by using trusts.
There are many different types of trusts that can be explored, one of the main benefits of a trust is that you can continue to utilise the assets or the income generates while you are still alive.
Within the trust, you can specify when the assets will be distributed after your death, which is a good option if you have a sizable estate that you want to convey slowly to your beneficiaries.
It can be more tax-efficient for IHT purposes to gift money while you are still alive. Every year you can give away £3,000 and that gift will not be subject to IHT. In addition, you can also give £250 to any number of people each year, as long as you have not used another exemption on the same person during the year. And finally, as a wedding gift parents can give £5,000 to each of their children and grandparents can give £2,500, for anyone else they can gift up to £1,000.
Life assurance can be used to either meet or reduce a prospective IHT bill.
The proceeds of the life assurance policy will not be included in your estate and when you pass away the policy pays out to the trust which pays all or part of the inheritance tax bill.
Here at Rotherham Taylor, we understand that planning for the future of your legacy and ensuring you’re making the right decisions is hard work.
It is always best to seek specialist advice, contact us today to find out how we can protect your wealth and assets.