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Despite the downturn in the economy and its subsequent reduction in the cost of property, the inflation effects of the past decade have meant that most peoples largest assets are still property based and from an inheritance tax (IHT) standpoint this can still be the largest single problem to solve as generally giving away property is a slippery slope that can cause a whole host of problems.

The UK government is estimated to make ? billion this year from IHT revenue and a large part of this is generated from the sale of property. However there are still a number of ways that you could save money on or avoid IHT all together.

The average house price in Greater London is ?72,000 and the nil rate band (NBR) being raised to ?25,000 from ?12,000 many people will hit surpass that limit with only one property and not look at any other projects.

The most common issue that complicates (IHT) is the level emotion that is involved in the proceedings it is necessary to state that the plans are being made to enable the retention of the assets in the most tax efficient way.

The first thing that needs to be mentioned is that you cannot pass over a property for free whilst still living in there. If you don’t declare this then you will flash on the radar of the HM Revenue who make a claim against you and you will achieve no saving.

The most fundamental and conclusive piece of advise is to ensure that you write a Will and keep it updated. According to IFAP over three quarters of the population do not have a Will that is up to date. This is paramount for people of high net worth as issues like trusts can be set up through the Will. Also, there have been many changes to tax and trust rules and this could render the Will a waste of paper. One of these recent updates has made it possible for married couples and civil partners to no longer need to structure their wills in order to gain all the two IHT allowances.

Releasing equity is one efficient method of reducing IHT if careful consideration is taken in relation to how the funds get used. Also it is worth noting that there is a tipping point where the accumulated interest will outweigh the savings in the IHT. This is also dependent on factors such as survivorship periods and is a very risky strategy.

Another option that is overlooked by families is the idea of giving away the home to the family and then paying them rent to live in it. This is a extremely suitable option for people who have got a good pension income because if there is at least a seven year survival then the home is IHT free. Furthermore the rent stays within the family as the rent goes towards the rest of the family. Although there are some implications as to the levels of income tax but assuming it is being passed onto lower tax payers, the savings will be dramatic. This is also the case with a second home.

To summarise IHT planning is a fundamental concept and if planned will it can maximise the amount that is passed on at the time of death. We have discussed a number of ways that you can save money by clever management of your property at the time of writing a Will.

This article indicates that despite the turbulence in the current house market property is still one of the safest investments for those seeking to leave a nest egg to their children and family.

Chris_Fensome

Tags: irs, tax, investments

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Tags: investments, irs, tax