Inheritance Tax (IHT) pertains to the tax paid on the value of an individual's estate after their passing. It might seem reasonable to question the purpose of planning for something inevitable.

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Perceptions differ on this matter:

• Some individuals believe that their wealth is theirs to enjoy, while the subsequent generation must independently forge their paths. On the other hand, there are those who are keen on minimizing the tax liabilities upon their demise. Inheritance Tax (IHT) planning caters to this latter group.

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Optimal Timing for Tax Planning:

• Talking about death isn't easy for everyone. It's our reluctance to address the unavoidable that often leads to complications. There exist reliefs capable of significantly reducing inheritance tax, but they generally require a structured plan to be in place for a minimum of two years before the relief can take effect. In specific circumstances, this duration can be considerably longer. Hence, waiting until our health deteriorates or we become frail often results in our actions having minimal impact. Therefore, proactive planning is paramount.

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Understanding Inheritance Tax Planning:

• Inheritance tax planning commences with assessing an individual's existing exposure to IHT. This process hinges on understanding the present value of all assets, gifts made within the preceding seven years, and the individual's residency and domicile status.

• It's also essential to identify their preferences regarding the disposition of certain assets. Whether they've formalized these decisions through a will further informs the process.

• Once the current IHT liability is established, strategies for mitigation can be devised.

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Reducing Inheritance.

Tax Several steps can be taken, including:

• Maximizing annual exemptions such as the annual gift allowance.

• Transferring assets to the next generation through lifetime gifts (potentially exempt transfers).

• Exploring applicable reliefs like business property relief.

• Considering charitable contributions.

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A comprehensive review can also uncover other potential tax triggers and identify reliefs to mitigate those, such as gift relief for capital gains tax.

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Trusts for Inheritance Tax Planning:

• Utilizing a trust may serve as a structure to safeguard assets and transfer them to the next generation. While we can provide insights into trust-related tax implications, drafting trust documentation typically involves legal expertise. Collaboration with a solicitor becomes crucial at this stage, especially as the planning process advances.

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PolTax Accountants: Your Inheritance Tax Planning Partner

Should you wish to delve into your Inheritance Tax planning requirements, don't hesitate to reach out. Call us or use our user-friendly online enquiry form to schedule a complimentary initial consultation

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