It is advisable to seek out professional advice for financial planning, to maximise any tax reliefs and allowances you are eligible to receive in order to reduce or avoid being liable to Inheritance Tax. There are a number of ways to avoid Inheritance Tax becoming due, but all should be considered carefully.
It is possible to insure against Inheritance Tax, although this option may be expensive unless you are in good health and relatively young. Inheritance Tax is sometimes due to be paid before you have received any money from the deceased estate. An insurance policy, which is known as a ‘whole of life’ policy, is taken out and written under trust for any heirs. The policy should pay out sufficient funds to cover the Inheritance Tax bill. As the policy is written under trust, it won’t be liable to an Inheritance Tax charge and will be paid before probate is granted.
A deed of variation can be drawn up within two years of the date of death, as long as all beneficiaries agree to the variation. This allows the will to be altered after death, so other parties will be liable for part of the Inheritance Tax bill.
If you have life insurance policies, they will be counted as part of your estate after death and therefore, could be liable to Inheritance Tax. To avoid this, any life insurance policies which you intend to be bequeathed to your heirs should be written under trust. A life insurance policy under trust isn’t counted towards your estate and is paid before probate is granted.
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