1. Draft a will
The only way to avoid intestacy and ensure your estate is distributed the way
you want it to be. If you’re married or in a civil partnership, you can leave
everything to your spouse or civil partner and no IHT is due because they
qualify as exempt beneficiaries.
2. Get hitched
To repeat, when an estate passes between a husband and wife, or between civil
partners, no IHT is due. What’s more, married couples and civil partners can
transfer any unused IHT allowance to the surviving spouse or civil partner when
3. Gift away assets
Giving away assets while you’re alive is another way to avoid paying IHT.
Beware, however: for the purposes of calculating IHT, assets given to others
within seven years of your death may, depending on the circumstances, be
included in your taxable estate.
If you live for seven years after you make a gift, rest assured no IHT is
payable on the value of the assets transferred. If you die within three to
seven years of making the gift, and no exemption
applies, IHT may be payable, but taper relief could reduce the amount due.
4. Set up a discounted gift trust or a loan trust
Setting up a discounted gift
trust involves giving away capital in return for a life-long income. A fixed
proportion of the gift falls immediately outside your estate for IHT purposes.
After seven years, provided you’re still alive, the whole of the gifted amount
falls outside the estate.
With loan trusts, you make a payment to a trust, which is treated as an
interest-free loan to the trustees. The trust then repays your loan in capital
instalments, giving you an income. When you die, any outstanding loan forms
part of your estate.
5. Take out an equity release plan
With an equity release plan you can either borrow money against the
value of your home (known as a lifetime mortgage), or sell part of your home at
a reduced market rate, but remain living there throughout your life (a home
reversion scheme). You can use the resulting income stream or capital in any
number of ways to decrease the value of your estate for IHT purposes.
** Additional Information & Advice **
Always seek advice from an independent financial planner and a solicitor who
specialises in tax law before pursuing any tax avoidance scheme. You can be
matched with solicitor in your area for free via solicitor
matching services, which can also help you to understand the best course of
action for your situation and whether you are ready to hire a solicitor.
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