Saving can be a matter of Trust

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Robert Little of Kirkleatham-based chartered financial planners Bob Little & Co on the best way to make gifts to loved ones…

Many families have been saved from the burden of Inheritance Tax by the recent introduction of the Residence Nil Rate Band.

This change grants an additional allowance to those who intend to leave their home to their children or grandchildren.

Many others though – including people without children, unmarried couples and single people – will still face a tax charge of up to 40% of the value of their assets when they eventually pass away.

In my opinion, one of the most effective ways to reduce an Inheritance Tax liability is to make gifts to loved ones.

However, this often presents several conundrums for my clients, many of whom wonder: “Will my children (or nieces, nephews, grandchildren or close friends) fritter away my gift?” and “What will happen if the recipient of the gift gets divorced or becomes bankrupt?”

These issues can normally be addressed by setting up a Trust and making a gift to the Trust rather than directly to the individuals.

Most people aren’t familiar with the concept of a Trust and might initially shy away from this concept because of concerns about complexity.

Admittedly, setting up a Trust is more complex than making an outright gift. But any worries about this process can easily be overcome by meeting with a financial adviser and/or a solicitor and asking questions.

If a gift isn’t the most suitable way to address an Inheritance Tax liability there are several other options available, including making contributions to a personal pension (which brings with it a whole host of other tax benefits) or considering certain types of investment which qualify for Inheritance Tax relief.

The key message here is if you are concerned about Inheritance Tax the last thing you should do is bury your head in the sand.

Instead make an appointment with a qualified and regulated financial adviser or a solicitor and consider the options available to you.

Robert Little
Bob Little & Co. Chartered Financial Planners


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