Inheritance tax can cost your family thousands if you don’t manage your assets correctly. And while managing assets may seem simple, it can get a little tricky if you don’t know what you’re doing. To help you out, we thought it would be useful to put together a couple of tips on how you can best protect your inheritance. If this is something that you want to learn more about, read on as we list down four effective tips that will help you reduce inheritance tax.

Make a Will

Making a will is one of the simplest and easiest ways to ensure your estate is distributed in the way you want. It allows you to choose how your assets are managed after you die and can help plan for, or avoid an inheritance tax bill. However, if you do not make a will, the government will decide how your assets are distributed (under the rules of intestacy). This is unlikely to be the most tax-efficient method.

Gift Your Assets Away

Giving away assets while you are alive can help to reduce the value of your estate for inheritance tax. The tricky part about gifting your assets aways is striking the perfect balance. Remember, you must have enough money to meet your own needs while giving away enough to reduce your estate value.

When it comes to gifting your assets, it’s important to note that some gifts are completely exempt from inheritance tax. Here are gifts that you don’t need to pay inheritance tax on:

1. Gifts for spouses
2. Wedding gifts
3. Gifts to charities and political parties
4. Annual exemptions

Utilize Life Insurance

Having life insurance means that if you die, your beneficiaries will receive a payout. However, if you haven’t placed the policy in trust, then inheritance tax will be due. To avoid this tax, your life insurance policy needs to be written in trust in order to separate it from your estate. If your life insurance is written in trust correctly, the net result is that your beneficiaries will receive your whole estate without a tax deduction.

Invest Wisely

If you plan carefully and invest tax-efficiently, you can avoid inheritance tax altogether. These investments are usually more complex, but working with an experienced financial advisor is crucial. Some types of investments buy shares in private companies. If you hold these shares for two years, then their value will be exempt from inheritance tax, so you won’t have to pay any tax on them when the shares are eventually passed on to your beneficiaries.

Conclusion

We hope this article proves to be useful when it comes to helping you protect your inheritance and minimize inheritance tax. Be sure to keep all of this information in mind so you can make the most informed decision regarding how you manage your assets. For those of you who need a little more help,  working with a professional, you can lower the amount of the inheritance tax that has to be paid for your estate, leaving more of your money to recipients.

Even with the tips that we’ve listed above, you will still benefit from some professional advice. Wills and Probate offer services covering wills and probate advice on inheritance taxes in the UK. Reach out to us today and find out how we can help you!