planning for Inheritance tax
Read Our In-depth guide to Inheritance Tax (pdf, 241Kb) It may seem callous to bring up the question of Taxation in a website designed to assist on bereavement. However we make no apologies for bringing this subject up as thousands of families are now finding Inheritance Tax is eating into the inheritances of children. This is beginning to happen to families who do not consider them selves to be wealthy. It is usually possible by some pre death planning to reduce or even totally avoid payment of this tax. But the necessary steps have to be taken by parties prior to their own deaths. This is just something to be dealt with.
Mr. Careless and Miss Worriknot
An unmarried couple with children have assets worth £300,000 each.
If they leave every thing to each other the outcome will lok like this
First death
Whole £312,000 is taxable at 0%
Inheritance Tax payable £0
Second death
First £312,000 is taxable at 0%
Next £31200 is taxable at 40%
Inheritance tax Payable £124,800
If a little tax planning had been carried out the result could be quite different - If on first death the estate has passed to a discrectionary trust for the survivor and the children then the result would be
First death
Whole £312,000 is taxable at 0%
Inheritance Tax payable £0
Second death
First £312,000 is taxable at 0%
Inheritance Tax Payable £0
Trust then pays out to children
Inheritance Tax Payable £0
There is a tax saving to the children of £124,800 as a result of a little tax planning being put in place.
Why pay Inheritance Tax unnecessarily when with a little thought the bill can be much reduced or sometimes escaped altogether.
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