How to Make Sure that Your Children Receive a Good Inheritance

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Posted on: 25 July 2014 by Laura Harrison

Discover how to avoid inheritance tax and ensure your children will receive a good inheritance once you have gone

While you may not want to think about it, it’s a fact of life that we are all going to die at some point. However, planning for death isn’t about being morbid, it’s about making important financial decisions and preparations so that things are a lot easier for yourself and your family for when it actually happens.

One thing that you will want to make sure of, is that your children and loved ones receive the inheritance that they deserve. And with all the rules and regulations that come with inheritance, it can sometimes feel daunting and overwhelming with where to even begin to get everything in order. Here are just a few simply explained options that you can do to make sure that your children receive a good inheritance.

Discretionary investment management

If you have a lot of capital, it is likely that you will want to invest it wisely so that can make a lot of money back on it and as a result have a bigger inheritance for your children.

If finance isn’t your strongest point and you don’t quite know the best ways of what to invest your money in, it is worth considering to use discretionary investment management. This involves communicating with an investment advisor who has complete discretion (usually with arranged limits) to manage and invest your capital without reference to you other than agreed reporting dates. In other words, you leave it to the professionals to make the decisions and increase your capital. 

However, it is worth noting this is something that you would need to do years in advance to your death if you want to increase your capital by a significant amount. Therefore, it is better to start planning sooner rather than later, despite whether you want to think about the future or not.

Being organised and giving your children a ‘gift’  

Inheritance tax can cost your loved ones thousands of pounds in the event of your death, especially if you have a very large amount of capital and assets. However it is possible to avoid getting severely taxed.

When you die, the government reviews how much your estate is worth. If the value exceeds the inheritance tax threshold of £325,000 you (technically your children) will have to pay tax at 40% for the amount over the threshold when you die.   

To avoid getting so heavily taxed, you can give money away as a gift to your loved ones before you die. However, the catch is that you have to give the gift seven years before you die in order to avoid any inheritance tax. Therefore, it requires early planning and overcoming the challenge of deciding when the best time to give the gift to loved ones is.

Other exemptions to lessen the tax bill

Even if you do die within seven years of making a gift to your loved ones, there are other exemptions that you can consider that will help to lessen the tax bill. For instance the annual inheritance tax gift exemption means that the first £3,000 given away each tax year is ignored and therefore will not get taxed if you die.

Furthermore, another option is to give £250 each year to all of your children (and maybe even grandchildren) for their birthday and it will be excluded from inheritance tax. This will slowly but surely make a dent in the bill and help to avoid getting taxed 40% for anything over the £325,000 threshold. Click here to see other many other options that you can consider.

Bearing in mind all of the above factors is extremely important if you want your children to receive a good inheritance and avoid huge amounts of tax once you have died. While, it is not necessarily the nicest subject to think about, it is certainly necessary to prepare in advance if you want to make it easier for you and your loved ones. 

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chandra shekhar posted 22 February 2020

Inheritance tax can cost your loved ones thousands of pounds in the event of your death, especially if you have a very large amount of capital and assets. However it is possible to avoid getting severely taxed.

When you die, the government reviews how much your estate is worth. If the value exceeds the inheritance tax threshold of £325,000 you (technically your children) will have to pay tax at 40% for the amount over the threshold when you die.   

To avoid getting so heavily taxed, you can give money away as a gift to your loved ones before you die. However, the catch is that you have to give the gift seven years before you die in order to avoid any inheritance tax. Therefore, it requires early planning and overcoming the challenge of deciding when the best time to give the gift to loved ones is.

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