Inheritance Tax And using Wills

A well known way to avoid inheritance tax on your death is to make a will so that you make best use of the allowances to you during your lifetime.

Of course, the main reason for making wills should not be to avoid inheritance tax, but to plan where your assets should go when you die.

If you do not make a will, you will die intestate. This means that you will lose control over the final destination of your assets (regardless of inheritance tax planning), and the state will decide the priorities based on an outdated formula. For example, if you are married, you could find that some of your money will go to your spouse, and some could go to your children. However, the amounts will not be determined by your choice or the needs of your family, but on a complicated formula.

Our advice to anyone seeking to plan for inheritance tax would be to make a will first, especially if you are married. By making a will you should be able to make best use of the available reliefs due to you, especially if you are part of a married couple.

Inheritance tax wills can help you to save a lot of tax. For example, a common solution that we recommend is for each partner in a married couple to use their wills to set up a trust on their death. On the first death the amount gifted into this trust (up to the tax-free limit of 255,000) will pass out of their estate free of inheritance tax. This money can then be used to benefit the surviving spouse.

The real savings with these type of inheritance tax wills are when the second spouse dies. Because we have placed some of the money into trust, their children can receive this money free of inheritance tax. If the maximum amount is invested in this way, these type of inheritance tax wills can save up to 102,000 in tax!

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