However, all too often, legacies include a costly surprise: a large inheritance tax bill. Inheritance Tax (IHT) is a tax on the estate (the property, money, and possessions) of a deceased person. If your estate is worth in excess of £325,000, it can be subject to IHT – the current rate is 40% on the portion of the estate that exceeds the threshold.

How to reduce your Inheritance Tax (IHT):

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‍There are several ways to reduce the potential tax liability on your estate. However, all involve careful planning – often over a long period of time, and well in advance. Furthermore, the tax rules involved in estate planning are complex, subject to change, and do require a detailed knowledge. To minimise IHT you might consider:

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• Lifetime gifts – gifting assets during your lifetime to reduce the size of your taxable estate.
• Setting up trusts – properly structured trusts may allow you to pass assets to beneficiaries while minimising tax implications.
• Utilising reliefs and exemptions – e.g. business relief (including agricultural property), gifting between spouses.
• Arranging life insurance – to provide funds upon your death to assist your beneficiaries when paying any due taxes.

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It is important to note that any plan to reduce IHT is essentially a balancing act, as it is important for you to still plan for your own financial future and current needs, and to enjoy yourself in your lifetime. Seeking the advice of a skilled and experienced accountant can help you to live life to the full now, and in the future.