If you do not get your Will written for any other reason, the savings that you could could make with effective Inheritance Tax Planning in Chelmsford and throughout England and Wales could be really significant.  With this in mind, Laura Richardson considers some of the key issues linked to how effective Inheritance Tax Planning in Chelmsford could potentially bring about real savings for you . . .

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With Inheritance Tax collections rising to more than £5billion in the last year, it is important to consider limiting the Inheritance Tax that will be payable on your estate. Currently estates worth above £325,000 attract Inheritance Tax at 40%, although recent changes have raised the threshold to £425,000 providing that the main residence is passed down to children, grandchildren, step-children or foster children. Andrew Douglas Wills and Legal Services have compiled a list of ways to reduce the Inheritance Tax due on your estate.

  1. Leave at least 10% of your estate to charity to reduce the rate of Inheritance Tax from 40% to 36%.
  2. Use trusts to transfer assets or cash out of your estate. For example, you could set up a Trust for your adult children to pay for your grandchildren’s education. There are strict guidelines on this type of Trust; therefore this is best discussed with qualified professionals such as Andrew Douglas Wills and Legal Services.
  3. Any gift given before you die is usually exempt from Inheritance Tax provided that you live for a further 7 years. However, there are further exemptions regardless of whether you die within the initial 7 year period. You can gift up to £3,000 annually. On top of this, you can gift up to £250 to any individuals during a calendar year. Further, any gifts to charities or political parties do not attract Inheritance Tax. There is also an allowance for gifts for a marriage. Currently a parent can gift their child £5,000, a grandparent can gift £2,500, and any other person can gift up to £1,000 all exempt from Inheritance Tax.
  4. Contribute to your pension. Money paid into a qualifying pension scheme is exempt from Inheritance Tax, any pay out to a dependent from the pension scheme is also exempt. Pension schemes vary, and it is important to seek advice regarding your Pension Scheme.
  5. Leave your estate to your spouse. If you leave your estate to your spouse, then the Inheritance Tax threshold amount is carried over and combined with that of your spouse. In numerical terms, this means that your estate is passed to your spouse free of Inheritance Tax, and when the surviving spouse dies, the Tax free allowances are combined meaning that the Inheritance Tax threshold will be raised to £650,000 when the estate is then passed down. This can save up to £130,000 in Inheritance Tax!
  6. Finally, you may wish to consider taking out a life insurance policy. Whilst this will not affect the amount of Inheritance Tax due, the pay-out can be used contribute to the payment of the Inheritance Tax. It is important to ensure that the policy pay-out is held in trust, for example by family member or spouse. This ensures that the pay-out is not included as part of your estate which would increase the amount of Inheritance Tax due!

If you would like to discuss Inheritance Tax planning in Chelmsford for your estate, contact Andrew Douglas Wills and Legal Services via www.andrewdouglaswills.co.uk today to arrange a free initial consultation in Chelmsford or throughout the surrounding areas of Essex.

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