Your Guide to Estate Planning
This article explains the process of estate planning and the reasons why many individuals make such plans and provisions for their loved ones in the event of their death.
Estate planning involves managing a person’s estate, in order to make their affairs as simple as possible and maximise the benefit to their beneficiaries.
As the old adage goes, there is nothing more certain than death and taxes. Even after death, we are faced with taxation on our estate, in the form of inheritance tax. One of the main reasons that individuals pay so much attention to estate planning is to minimise the amount of inheritance tax that is paid on their estate.
Individuals whose assets total £312,000 (£624,000 for couples) or less are exempt from taxation. However, estates amounting to more than this are liable for a charge of 40% on their estate.
What does my estate include?
A person’s estate includes everything that is owned in their name and their share in anything owned jointly. In addition to this are trusts from which they gain an income and gifts, which the benefactor gains benefit from. An example of this is a house given to children in which the parent still lives.
This above is less reductions in the form of anything the deceased owed, such as loans or mortgages, unpaid bills and other costs such as funeral expenses.
Effective estate planning can help you to reduce the amount of inheritance tax your beneficiaries have to pay.
Ways to avoid paying inheritance tax
individuals can avoid paying inheritance tax by making gifts of money to friends and family. Money gifted to an individual is not taxed if the benefactor survives for seven years after making the gift. This is known as a ‘potentially exempt transfer’ and is one of the most useful measures for effective estate planning.
Another way to avoid tax is by putting money into what is known as a ‘bare trust.’ This is a fund which the beneficiary is entitled to access once they reach the age of 18. This is a popular means of estate planning for those with grandchildren, as it falls under the category of a ‘potentially exempt transfer.’
There are other gifts, which are completely tax exempt. One of the most popular of these is wedding gifts. Individuals can give up to £5000 to each of their children, £2500 to each grandchild, and £1000 to anyone else. Gifts to charities, political parties, the National Trust and most museums are also exempt from taxation.
Trust Inheritance
The goals of estate planning are not just financial, as individuals may wish to make other provisions such as designating guardians for their children and making funeral arrangements.
Trust Inheritance specialise in helping individuals to put in place effective estate planning strategies. They also offer a range of will writing, will executor and probate services. To find out more, visit: http://www.trustinheritance.com