Pension Practitioner
The SSAS Experts

How to: Tackle your IHT liability

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Trust planning can help minimise or in some cases mitigate an IHT liability.  When your assets are placed into trust, they no longer form a part of your estate. There are many types of trusts available, which can be set up at little or no charge.  They usually involve settlors investing a sum of money into a trust. The trust has to be set up with trustees – whose roles are to ensure that the investment is paid out at the wishes of the settlor. In most cases, this will be to children or grandchildren.

Life insurance

Another way you can tackle your IHT is by insuring your potential liability, which involves taking out life insurance to cover the costs of the 40% tax bill.

This could potentially include:

A Whole of Life policy – which has a sum assured, paid to the beneficiaries or executors of your estate on death. This is written under Trust and won’t be added to your estate, as the money in the Trust doesn’t belong to you – it belongs to your chosen Trustees and can be used to pay towards any IHT bill on your estate.

A Level Term Assurance – this is designed to provide a lump sum upon your death during the term of policy. Should you die within 7 years of having made a PET or CLT (Chargeable Lifetime Transfer), this option could cover the potential IHT liability that would arise.

Annual gift allowance – each year, you’re able to give away cash or a gift worth up to £3,000, which is automatically exempt from IHT upon your death.

And one great benefit is that you can transfer your unused allowance over to the following year – so in one year, you’re entitled to give away up to £6,000.

7 year rule – you can give away as much as you want and providing that you survive seven years from the date of the gift, the value of the gift will fall outside of your estate for IHT purposes. If you’re considering this route, you need to ensure you’ll have enough money left over to maintain you quality of life during your later years.

Ensure your Will is up to date

This is a hugley important factor in estate planning and ensures that your assets are distributed to the right people. It’s especially important if you have a spouse or partner, as there is no IHT payable between the two of you but there could be tax payable if you die intestate (without a Will) and assets end up going to other relatives.


Obtain financial guidance

IHT is an extremely complex area, and the consequences of ignoring it or getting it wrong could prove costly and distressing for your family and loved ones.  We help you reduce or eliminate entirely your IHT.


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