Let’s face it: there’s not a great deal to like about inheritance tax. And with inheritance tax collection hitting all-time highs, it is no surprise then that families are looking into ways of limiting the tax imposed on their legacy.

Preparation is key

Preparing for your children’s future needn’t be an overwhelming prospect or one filled with dread. Careful financial preparation will relieve the financial onus for your family and ensure they receive as much of your gift as is legally possible.

Whilst inheritance tax bequeaths heavy burden, the shining light is that inheritance tax can be minimised. Below, we lay out ways as to how.

Insure yourself

One tactic to protect your family from facing a hefty tax bill is to take out an insurance policy. Financial advisers are employing this route more and more for their wealthy clients.

Policies can either be:

• “term”, with a cover period of 5 or 10 years, or
• “whole of life”, meaning cover ends upon death.

Insurers determine a monthly premium based on health and age and pay out a lump sum after you’ve passed. This payout offers a means for families to cover any liable inheritance tax rather than digging deep into their own pockets or, worse, racking up debt.

Policy premiums come variable or guaranteed.

• The risk with variable premiums is that they rise – and can become exorbitant, leaving many disfavoured or even obliged to give up the policy altogether.
• With a guaranteed premium, you will pay more but you won’t be faced with surprise increases you can ill afford. Variable or guaranteed, so long as the policy is written ‘in trust’, the payout will not be diminished by inheritance tax.

Gift your spouse

Another way to limit death duties is handing your estate to your spouse before you die: assets passed between spouses are exempt from tax. By setting up a company and signing this over to your spouse while you are still alive, the only tax they will be subject to is income tax, should they release the monies from the company.

How VaultWill can help

VaultWill can assist with these preparations, helping lower overall probate costs including those of probate solicitors.

Please have a readthrough of our case studies to see how our expert advice can guide you to getting your financial affairs in order.

The legislation isn’t simple; but using the VaultWill platform will simplify it for you.