Making a will is always a good way of making the best available use of your inheritance tax (IHT) allowance and minimising the amount of IHT payable when you die.
What a will can’t do though is reduce the value of your estate available for taxation, this will instead need some forward planning and this is something a financial advisor may be able to help you with.
There are a number of options available to you, which may include disposing of some of your wealth while you’re still alive in the form of gifts (known as potentially exempt transfers). This should be done carefully though as there are rules associated with making gifts in that you have to survive for at least seven years after the gift is made, for it not to have any liability for IHT.
There are however, certain allowable gifts and amounts which can be made completely free of IHT liability, no matter how long you survive afterwards.
Find out more about IHT thresholds and the amounts payable please see the links at the end of this article.
Charities and political parties
One way of using your will to reduce your liability for IHT and the rate of tax you’ll be charged is to consider a gift in your will to a charity or a political party. Such gifts do not count towards your IHT allowance, are IHT exempt and reduce the overall value of your estate when any IHT liability is calculated. Plus if you choose to leave at least 10% of your estate to charity, rather than being charged 40% inheritance tax on any amount over your IHT threshold, it will be reduced to 36%.
When you make your Affio will, we’ll explain your options as you go along, so you can make the decisions that are right for you and your family.