If there is an estate which is larger in value that the current threshold amount of £325,000 (the Nil rate band), there will have to be paid inheritance tax (IHT)
Married couples can transfer their nil rate bands to their spouses thus allowing for the second person. The Nil rate bad is likely to increase in the future as it has done in the past.
Some Ways to Mitigate Inheritance Tax (IHT):
- Nominees of life insurance policies, bonds, death in service benefits (DISB) or death benefit are not subjected to tax as they are not treated as being the a part of the assets of the deceased.
- Creation of family Trusts where life insurance policies, death in service benefits and pensions can be nominated into a trust outside of Testators estate. These trusts can have powers to allow the use of income by a beneficiary (surviving spouse) to spend or invest and receipt of loans. On the death of the surviving spouse IHT will need to be paid however as the beneficiary owes a debt to the trust the capital used from the trust does not therefore attract IHT thus reducing the inheritance tax owed.
- The use of Trusts such as flexible life Interest trusts (for people with disabilities) allows you and the beneficiary to save tax.
- Giving gifts of land, money or property 7 years before you die.