Inheritance tax planning
More people being hit by inheritance tax
The inheritance tax threshold is currently £300,000. This means that your beneficiaries would currently have to pay 40% tax on any value of your estate above this threshold. So, on an estate of £365,000, your beneficiaries would receive a staggering £26,000 inheritance tax bill.
The inheritance tax threshold is stepped, with an increase planned in 2008 to £312,000. However, the inheritance tax threshold has failed to reflect increasing house prices over the last ten years. Research by Key Retirement Solutions has found that the average homeowner in some areas of the country could soon find that their estate is liable for inheritance tax if it isn't already.
Ways to reduce your inheritance tax bill
Some people assume that they can reduce their inheritance tax liability by giving their home to their children whilst continuing to live in it. However, this would not usually work due to either the 'gift with reservation rule' or Pre Owned Asset Tax which target people entering into agreements to dispose of assets whilst continuing to use them. These two measures ensure that your assets are likely to remain a part of your estate.
There are still ways to ensure that your beneficiaries receive a reduced inheritance tax bill, if any. One of these is through an equity release plan which would reduce the value of your estate.
Another way in which you can limit the amount of inheritance tax due on your estate is through a trust, which allows you to legitimately remove assets from your estate if set up appropriately.
Contact us for more details on inheritance tax planning and how equity release can help.