With the cost of living still high, many of us are anxious to discover more about how we can share our assets to assist our loved ones in becoming financially stable. Explore the main ways you can pass on your wealth and how to minimise the tax on these payments.
Write a will
Ensure your assets are appropriately distributed by working with probate solicitors to write a will. This legal document outlines your assets and how they should be distributed after your death, managed by an executor nominated by you.
Having a will in place protects your loved ones from makingdifficult decisions about the division of your estate and can help you reduce the amount of inheritance tax on your assets. You can also use your will to name guardians for your children and dedicate possessions or financial gifts to others outside your family. Without a will, your estate will be distributed in line with the law which could leave some loved ones without a fair settlement.
Create a trust
If you want your family to have access to your wealth during your lifetime, you could create a trust. Working with a trustee, you can set aside assets for a named person to receive at a specific time, such as on their 21st birthday. Details of inheritance are outlined in a deed.
There are several types of trusts, and each is taxed differently, so you might want to seek advice from a solicitor or financial advisor before setting up the arrangements. Bear in mind that while a trust reduces the tax on your remaining estate, inheritance tax applies when assets are transferred in and out of a trust and every ten years while it remains in a trust.
Gift money
Particularly useful if you want to help your children with significant purchases such as putting down a deposit on a house, you can gift money throughout your lifetime. Gifted assets, whether money, goods, investments or property, are free of inheritance tax as long as they are given at least seven years before you die.
When gifting assets, you will need to sign a legal document confirming that you won’t be asking for them back. You will also need to declare the transfer to HMRC. Small sums of money – up to £3,000 per year – can be gifted tax-freewithout being added to the value of your estate.
Make donations
As strange as it sounds, donating a portion of your estate to charity can help you pass on more wealth to your family. A donation of at least 10% of your estate will lower the tax on your inheritance to 36%, enabling your loved ones to see a greater portion of your wealth.
