Inheritance Tax is up to 40% on all assets in your estate over the nil rate band of £325,000.
You may also be entitled to the residence nil rate band which is an additional £175,000 free from inheritance tax if you leave your primary residence to a direct descendant such as a child or grandchild.
These allowances have been frozen by the government until 2028. It is likely that your assets will continue to increase in value over time meaning that your inheritance tax liability will continue to grow.
Inheritance Tax can significantly impact the assets passed down to your loved ones after you die. One question we are often asked by clients is if they should put their house into a trust to avoid paying Inheritance Tax on their house value
What is a Trust?
It is important that you understand what a trust is before you consider whether you should put your property into trust.
A trust is a legal arrangement allowing an individual (also known as the settlor) to transfer assets such as property, money or investments to trustees. A trust usually has at least 2 trustees who look after these assets inside of the trust for the benefit of the beneficiaries who have been nominated by the settlor.
There are different types of trust and each trust has it’s own tax implications. Book a no-obligation meeting with a financial adviser to understand these or call us on 0117 973 0500.
Should I put my house into trust to reduce Inheritance Tax?
When you put your house into trust it is outside of your taxable estate after 7 years. This could significantly reduce the inheritance tax bill that your beneficiaries are faced with when you pass away. However, it is important to carefully consider what type of trust you put it in and also be aware of any other tax liabilities that might arise.
Trusts allow the settlor to maintain some control and the settlor can stipulate conditions over who and when the beneficiaries receive the assets that have been put into trust.
Placing assets into trust means they are no longer in the settlor’s estate so they effectively bypass the probate process which can take months. This means that the assets can be distributed to the settlors chosen beneficiaries quicker when they pass away.
It is important that you understand that by putting your house into trust, you are effectively giving up ownership and your chosen trustees will manage the trust.
Deciding whether to put your house into trust is a big decision and is not the right decision for everyone. At Four Wealth Management, our financial advisers specialise in estate planning and can provide you with advice based on your individual circumstances to help you make a decision.
Book a no-obligation meeting online now or call us on 0117 973 0500.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
Trusts are not regulated by the Financial Conduct Authority.
