When you are nearing the end of your life, you don’t want to leave your loved ones with additional problems. The usual way to handle this issue is to have a will. One major focus of a good will is the proper handling of inheritance tax. Unfortunately, the UK has a high 40 per cent inheritance tax. That can mean your heirs are paying a large tax fee. However, it is possible to lighten the load a bit. Here are a few tips that should help.
Get a professional to help
Dealing with inheritance taxes is a part of financial planning, and professional services can help. Their main purpose is to advise on what to do. Working with local financial planners is a good idea since they know the various rules and tax codes. The perspective that planners can give also ensures that you don’t forget other things like the estate tax and more. Local laws can also affect your plans, depending on where your properties are. For example, the fees in Kent may differ from those in Manchester.
Know the rules
While a financial planner can be a big help, you should sit down and study the rules that govern inheritance tax. For example, the government has a pretty good website covering many basics. It includes things like the basic threshold of £325,000. An inheritance tax won’t be levied if your entire estate is worth beneath that amount. Additionally, the tax is only on the valued property over the threshold,
Make the transfers before you die
The key thing to remember is that inheritance tax only looks at a property’s value after the owner’s death. If you had your estate assessed, you would be able to identify exactly what you can transfer to your loved ones. The main problem is that the government will pay attention if you do the transfer all at once. The recommendation is to transfer properties over the years in the form of gifts. There is a limit to the transfer every year before taxes, so you’ll have to be careful. It would help if you noted additional exemptions, like leaving everything beyond the threshold to your spouse. While it does eliminate the inheritance tax, this approach passes it on to future heirs since it can only be done with a spouse.
Donate to charities
A great idea to eliminate inheritance tax is to donate everything above the tax threshold. This approach is not ideal if you are very rich, but if you only have a few thousand pounds extra, you can eliminate the worry about taxes by simply donating the money. Of course, you will have to be selective about the charities to which you will give the money since you want that money spent for good use.
Paying thousands of pounds in taxes can be a massive burden for those you leave behind. You don’t want to worry about your loved ones when you die. Use the tips above to ensure that your heirs won’t have to pay excessive taxes.