Passing on wealth to your loved ones is an important consideration for many of our clients. After all, we would all like to be able to help our loved ones after we’re gone. It’s not the easiest of conversations, but a little time spent discussing how to pass on your wealth with us today could protect your inheritance and offer security for your family tomorrow.

We can help you ensure that your assets are transferred smoothly and according to your wishes. However, it’s crucial you’re aware of any Inheritance Tax (IHT) implications that may arise. 

IHT is a tax levied on the estate of a deceased person. The tax is typically calculated based on the total value of the estate above a certain threshold, known as the inheritance tax threshold or nil-rate band. This is currently £325,000 for the 2023/24 tax year. An additional tax-free allowance of £175,000 is available in relation to family homes. Despite this, the rise in house prices has led to more people than ever becoming subject to IHT.

However, there are several things you can do to mitigate what you might be currently on course to pay:

  1. Tax-free allowances and exemptions: Familiarise yourself with the tax laws to understand the available allowances and exemptions. These may include tax-free thresholds, spouse exemptions, and specific reliefs for certain assets or circumstances. Properly utilising these allowances can help reduce your overall tax liability.

  2. Gifting: One way to reduce the value of your estate is by making lifetime gifts to your loved ones. There are annual exemptions that allow you to gift up to a certain amount without incurring tax.

  3. Trusts: Trusts can be an effective tool for passing on wealth while minimising IHT. By transferring assets into a trust, you can remove them from your estate, potentially reducing the tax liability. There are different types of trusts with varying tax implications, so seeking professional advice is crucial to determine the most suitable option for your circumstances.

  4. Life insurance: Consider taking out a life insurance policy that pays out a sum of money upon your death. The proceeds from the policy are generally exempt from IHT and can provide your loved ones with funds to cover any tax liability or other expenses. This can be complicated so we would recommend you speak to one of our financial advisers. 

  5. Estate planning: Comprehensive estate planning involves creating a will and regularly reviewing it to ensure it reflects your current wishes. We can help you structure your assets in a tax-efficient manner and navigate the complexities of IHT.

It can be a difficult subject to approach and it’s important to be aware that tax laws and regulations vary by jurisdiction, and they can change over time.

However, we’re here to help. We can work together to help make sure you protect your inheritance and pass your wealth on to your loved ones.

Inheritance tax planning, trusts, tax planning, will writing and estate planning are not regulated by the Financial Conduct Authority.

Will writing is not part of the Quilter Financial Planning offering and is offered in our own right. Quilter Financial Planning accept no responsibility for this aspect of our business.