You spend your lifetime building and preserving your wealth but ensuring that it is passed to your future generations tax-efficiently requires strategic planning in the form of creating an estate plan.
Estate planning is creating a plan to pass your wealth onto your loved ones after you pass away. The first step is usually to make a Will to outline who receives your assets and when.
Utilise gifting strategies
In the UK, individuals can gift up to £3,000 per tax year free from inheritance tax. This gift is immediately outside of your estate. Any unused portions of the previous years allowance can be carried forward for one year.
It is important to note that it is £3,000 in total, not £3,000 per beneficiary.
You could also look to utilise the allowance of gifting of up to £250 per year per recipient as long as you haven’t used a different allowance on the same beneficiary. There is no limit on the amount of people that you gift up to £250 to.
Gifting from excess income
Another allowance that is not very well known, is gifting from excess income.
There is no limit on the amount that can be gifted from excess income and it is immediately exempt from any Inheritance Tax liability as long as the gift is made from excess income and does not affect your current lifestyle.
To make use of this allowance, it is important that the gifts are regular and that you keep accurate records to prove this. If you make the payments by direct debit then this proves that the gift is intended to be regular.
This allowance is complex and everything must be documented in detail to make sure that the gifts are outside of your estate when you pass away. For help using this allowance, you can book a no-obligation meeting with a financial adviser online or call us on 0117 973 0500.
Consider trust planning
Trusts play a crucial role in transferring wealth while allowing you to retain control over assets. It is often a preferred way for people to gift large amounts of assets to their loved ones as you can dictate who receives it and when. Trusts are outside of your estate for inheritance tax purposes and assets held in trust are protected in other instances, for example if one of your beneficiaries were to get divorced then the trust assets would not be included in divorce proceedings.
Trusts are complex and there are different types of trusts that you can consider. To help you understand your options you can book a no-obligation meeting with a financial adviser online or call us on 0117 973 0500.
Your pensions are a tax-efficient way to pass wealth to your loved ones
Your pensions are outside of your estate for inheritance tax purposes and are therefore a good way to pass on wealth to your beneficiaries will avoiding inheritance tax which can be up to 40% of the value. To help you to pass on more assets from your pension, a financial adviser at Four Wealth Management can work with you to create a financial plan which will help you to get income at retirement from other sources so that your pension values remain as high as possible.
Book a meeting with a financial adviser
Transferring wealth to the next generation in the UK tax-efficiently requires careful planning, a proactive strategy and an understanding of legal and tax considerations.
A financial adviser at Four Wealth Management can help you to create a long-lasting legacy and make sure your loved ones receive as much of your estate as possible.
You can book a no-obligation meeting with a financial adviser online to find out how we can help with your estate planning or call us on 0117 973 0500. Meetings usually last 1 hour and can be at your home address, at one of our offices or on zoom.
The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.
Will writing involves referral to a service that is separate and distinct to those offered by St. James’s Place. Wills are not regulated by the Financial Conduct Authority.
Trusts are not regulated by the Financial Conduct Authority.
