How to avoid Inheritance Tax

An adviser can help to you show you some of the simple cost free ways to reduce your IHT liability, if not avoid it all together, and you can make a start on these right now:

• Small gifts
  You can give small gifts freely, as long as it’s limited to £250 per individual per year.
  
• Annual exemption
  The first £3,000 in cash or goods that you give away each year is exempt. If you don’t use your allowance in one year then it can be carried forward, but only to the next tax year.
  
• Marriage gifts
  You can give gifts of up to £5,000 to each of your children when they get married or £2,500 to grandchildren. You can give £1,000 to anybody else.
  

And that’s not all. You can also utilise:

• Potentially Exempt Transfers (PETs)
  PETs are other gifts that could reduce your taxable estate if you live for 7 years or more after making the gift. These have to be given without you receiving anything in return, although a kiss and a cuddle from the grandkids is okay if they are the recipient! If you do pass over in the 7 year period, but after the first 3 years, then your gift may qualify for ‘taper relief’ which means the tax you pay, will be less than the normal 40%.

Here's how it works:

And with advice from one of Legal & General’s experts we can help you make the most of:

• Investing in trusts
  Gifts into these can be effective in mitigating or avoiding IHT whilst allowing you to keep control over who will benefit.
• Using the nil rate allowance
  If both spouses are using their nil rate band allowance on death you can save up to £120,000 in tax for your loved ones.
  
• Using life policies
  With life policies, the proceeds go straight to the beneficiaries who can then use the money to help pay the IHT bill.
  
• Making a Will
  Obvious one really, but by writing your Will you can make sure that your estate is given out in the way you want.
  
• Giving to charity
  All you need to do is name the charity in your Will and any donation you make will not be liable to IHT.
  
• Teaming up with a solicitor
  Having a solicitor on side will help you make sure that you are making the most of your Will, trusts and nil rate bands.
  
  

As you can see, there are plenty of ways to avoid and reduce IHT, but it doesn’t need to be complicated.

To find out how to make it simple, make an appointment with an expert from Legal & General today.