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Inheritance Tax: What Are Your Options?

By | Taxation | No Comments

There are several simple and cost effective options available to help you manage and reduce your potential Inheritance Tax liability, including making a Will, funding for an expected liability using life assurance and inheritance tax mitigating investments. As a firm of Chartered Financial Planners and an IFA in Lincoln and across the East Midlands (Independent Financial Adviser) we can work with you to advise and support on all aspects of Inheritance Tax and wealth management planning.

It is important to note that although there are several ways you can address your Inheritance Tax liability; it is imperative that you start planning early as many of the potential solutions require you to live for at least seven years to be fully effective.

Being prepared early also brings peace of mind that you have planned for the future and protected your loved ones from unnecessary complications during an already stressful time.

Wills, Trusts and Pensions

As an IFA in Lincoln and the surrounding areas, we regularly work with our clients to ensure that their estate planning is arranged in the most effective way and reduces the amount of Inheritance Tax liability by making the best possible use of the allowances and reliefs available to both spouses.

Wills, Trusts and pensions not only provide legal ways of helping to reduce or avoid Inheritance Tax, but helps ensure as much of your wealth as possible is retained by your family and that your ‘wishes’ are carried out. Without a Will, you cannot:

  • Pass your estate to an unmarried partner.
  • Decide how much money and other assets each of your family members receive.
  • Specify who will become the guardians of your children.
  • Give a memento – e.g. a piece of jewellery to a friend or a family member.
  • Leave something to charity.
  • Potentially minimise Inheritance Tax.

There are a range of different types of Wills to allow for different circumstances, including Wills that seek to minimise Inheritance Tax liability and provide full estate planning solutions. As an IFA in Lincoln we can help you with all aspects of Will planning.

The Life Insurance Factor

Another way to eliminate or reduce Inheritance Tax is to insure the liability by taking out life insurance to cover the cost of the tax bill that your heirs will have to pay when you die. There are two life insurance options available:

  • A Whole of Life policy which has a sum assured, paid to the beneficiaries on death. It is written under Trust so it will not be added to your estate. As the money in the Trust doesn’t belong to you, but to the trustees they can then distribute any proceeds as appropriate and in accordance with your wishes.
  • A Level Term Assurance is designed to provide a lump sum in the event of death during the term of policy. This makes it a useful option to cover a potential Inheritance Tax liability that would arise should a donor die within seven years of having made a Potentially Exempt Transfer (PET) or Chargeable Lifetime Transfer (CLT).

There are several ways you may be able to reduce or eliminate your Inheritance Tax liability, the sooner you act, the greater the flexibility you will have. As an experienced IFAin Lincoln we can work with you to reduce your liability.

If you are looking for an IFA in Lincoln or across the East Midlands, please do not hesitate to get in touch to talk about the most appropriate financial products for your personal circumstances.