How to: Plan your estate

8th September 2014

If your estate – the value of your assets, including property, land, business assets, savings and valuable possessions – is worth more than £325,000, you will be taxed on anything above this upper limit at a rate of 40%.

Setting up a trust

Your first job is to work out how much your assets are worth. Then subtract any outstanding debts, including mortgages and loans. The final sum will give you the value of your estate.

If the value exceeds the £325,000 threshold, you may wish to consider setting up a trust. Doing so will allow you to set aside some of your property or assets so that they are no longer included in the value of your estate, and are no longer subject to IHT.

This fund can be used to pay for a range of things, including your own medical care if you are too ill to look after yourself as you get older or a grandchild’s education. There are many different types of trust, each with its own set of complex rules and tax treatment, so it is worth talking to an expert before deciding which type is best for you.

Other ways to avoid paying IHT on your estate

Giving to charity. Charitable donations are exempt from IHT and if you leave 10% or more of your estate to a worthy cause, you may end up paying a lower rate on the remainder of your estate.

Giving to your partner. If you bestow any financial gifts on your partner before you die, these will be exempt from IHT until he or she dies.

Giving to friends and family. You can give up to £3,000 in total to loved ones each year. Providing that you do so 7 or more years before you die, you will not need to pay any IHT on these gifts.

Talk to us about your plans

Dunkley’s can help you to plan your estate to the best possible advantage. Our experts will help you work out how much inheritance tax you are currently subject to and how much you can avoid paying without breaking the law.

We will work with you to ensure that your money and possessions are distributed in exactly the way you wish and in the most tax-efficient way possible.

Contact us today on 01454 619900 or advice@dunkleys.accountants to find out more.

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