Inheritance tax is unfortunately a fact of life but the good news is you can take steps to minimise the amount your loved ones have to pay after you die.
Inheritance tax (IHT) and Wills go hand in hand and you should use your Will to keep the amount of IHT owed on your estate to the smallest possible sum – as well as to look after loved ones when you’re no longer around.
Inheritance Tax Facts
According to the Office for Budget Responsibility (OBR), approximately 6.5% of estates will face the 40% IHT rate by 2026 – which is a lot more than the 3.7% of estates facing the higher rate in 2020. So, what is causing this sharp increase in estates facing the higher IHT rate? According to the OBR, it’s a combination of:- Huge rises in property prices
- Extra deaths caused by the Covid-19 pandemic
What Are The Implications Of More Estates Facing 40% IHT Rate?
It is likely that more and more people will want to minimise or avoid IHT being payable by sharing their wealth during their lifetime rather than leaving it to loved ones in their Wills. Lifetime giving can be challenging, though, and you should be wary of:- Undue influence This is when someone is pressured into making a big gift of money or property, when perhaps they don’t want to. This so-called undue influence can be hard to identify and establish either during the lifetime of the victim or after their death, but it’s not impossible. Even when someone appears willing to transfer across their property, they can still be found to have done so under undue influence.
- Predators With wealthy elderly relatives, you need to be watchful of greedy family members but also stranger predators. There are individuals who will try to groom vulnerable elderly victims into marriage – it’s scary how few safeguards are actually in place to prevent a marriage involving an elderly person lacking mental capacity. As marriage cancels an existing Will, a victim’s ‘spouse’ inherits the estate, and benefits from the IHT spouse allowance too.
- Gift with reservation of benefits
