Best Way To Avoid Inheritance Tax On Property

If there is one thing that people worry about when it comes to owning property, it’s the inheritance tax that will need to be paid on it later in life. If you think that your property and estate may need to pay inheritance tax, you will likely wonder what you could be doing to lessen the hold that the taxman has on it. It doesn’t seem fair that there is a tax on your death, especially given that you would have bought your property with money that has already been subjected to income tax!

The good news is that it doesn’t have to mean that you change your Will. There are several things that you could do instead to keep as much of your future inheritance protected. Let’s go through your options:

Give It Away

Well, not exactly! You don’t just hand over your property to a stranger, but you do need to think about how you go about giving away your assets. You can do this with a gift, setting up a trust or even changing the Will as the last resort. You have to speak to someone who specialises in tax and inheritance if you want to make significant changes, but if you’re married, you can give your property to your spouse so that your estate won’t need to pay any inheritance tax on what it’s worth.

Have a Trust

If you put some money or properties into a trust that you cannot benefit from – or your children – you can’t consider it to be a part of your estate. You can set up a trust to pay for the education for your grandchildren, or you can set it up as a way to support someone else, and you can do it right away. You won’t have to pay Capital Gains Tax if you establish a trust in your Will.

Leave It to Charity

You can choose to leave your property to a charity if you have no direct beneficiaries. You can reduce your inheritance tax bill when you benefit a good cause, even leaving 10% to charity will reduce your inheritance tax. There are plenty of known benefits to giving to charity, but if you put it into your Will, you’re going to reduce your tax bill and do better for the future.

Purchase Life Insurance

Taking out life insurance won’t reduce your inheritance tax bill, but it will ensure that your family have enough money to pay the tax bill in the first place. They may be able to stop their home from being sold if they can pay the inheritance tax bill on it. If you do it, though, make sure that you direct your life insurance payment into a trust when it’s released. If you don’t do this, you could make your estate bigger, which equals more tax in the end.

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