If you’ve been reading our recent article series on inheritance tax (IHT) you’ll know the importance of planning for IHT in advance, and what forms your personal representative will need to fill in after your death.
Here we’re going to put to you a number of mistakes that it’s easy to make with regard to IHT, along with our own thoughts on how you can avoid them. Some of these mistakes are things you should look out for in the future, while others you may already be falling victim to. Once you’ve read through this list twice, take a look take a look at this other great list from The Times.
Not Planning in Advance
It seems obvious, but this is where it all begins. If you don’t plan for the fallout of IHT in advance you could be throwing away thousands (maybe even tens of thousands) of pounds that could have otherwise benefited your beneficiaries. It’s never too early to start planning.
Improper Planning of Pension Funds
Your pension fund(s) can be passed on to your dependants (spouse, children, step-children, and grandchildren) IHT free. If it’s paid to your estate after your death, or to non-dependents, it will be liable to IHT.
Not Writing Life Insurance Policies in Trust
If a life insurance policy is written into trust, on your death the proceeds from the policy can be paid directly to your beneficiaries instead of to your estate, thus its value won’t add to the value of your estate.
Avoiding Generational Planning
Talking about money, inheritance, and Wills with your family is never easy. But avoiding these conversations may be an even bigger mistake when it comes to IHT, as generational planning with regard to wealth creation and preservation can save your estate thousands of pounds.
Having an Outdated Will
Your Will is outdated if, among other things, any of the beneficiaries have died, any notable assets no longer belong to you, or it refers to your ‘spouse’ but you have since divorced. Make an effort to update your Will regularly.
Trying to Avoid IHT by Living Abroad
Living abroad doesn’t necessarily mean your estate is exempt from IHT upon your death, especially if you wish to be buried in the UK. If you’re currently living abroad ask a UK-based accountant about your specific situation.
Having Low Estate Liquidity
Having low estate liquidity means you don’t have enough (or much) cash available at your death to cover IHT, without assets needing to be sold to cover this bill. Consider taking out life insurance to help overcome any deficit.
Gifts Made With Reservation
If you’ve given a gift with reservation in the past this may come back to bite your estate after your death. One of the best examples of this is gifting your home to your children, then continuing to live in it rent free.
Losing the Family Home
This may not be as much of an issue in upcoming tax years’ as an increase to the current IHT allowance of £175,000 between now and 2020, commonly known as a family home allowance, will work to ensure that all family homes £1m and below (two spousal allowances of £500,000 each) can be passed down IHT free.
Not Speaking with a Professional
Last but not least, when it comes to IHT one of the biggest mistakes you can make is not speaking with a professional sooner! Here at TaxAgility our professional accountants are experienced in everything related to IHT; they’re here to save you money.
Experienced Inheritance Tax Accountants
To speak with a professional accountant to discuss more ways you can maximise the value of your estate with inheritance tax planning, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.