Tuesday , 5 March 2024

Leave A Lucrative Inheritance – Here’s How

…Planning ahead for what will happen to your estate after you die is important [and] there are a number of things you can do right now to make sure…[you] leave a lucrative inheritance for your loved ones…

This version of the original article from thepuregoldcompany.co.uk has been edited [ ] and abridged (…) to provide you with a faster and easier read. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

Consider the importance of Wills

Any sound financial advisor will tell you ‘Everyone should make a Will.’ You also need to ensure it is updated to reflect your current intentions. Failing to make or update your will can result in it being challenged. Circumstances change, and if there have been life events like births, deaths and marriages, a will may need to be reviewed or changed. That said, a will can be contested, which will inevitably require legal recourse. This can eat into the inheritance itself.

Similarly, if someone dies intestate or without a will, the legal rules on who will inherit may be contested…It’s the responsibility of the person writing the will to ensure it is clear and there can be no confusion about its interpretation.

The advantages of life insurance

A person who takes out a life insurance policy is ensuring their dependents or spouses are provided for in the event of an untimely death. Putting a life insurance policy into a trust will help limit the final inheritance tax bill by ensuring the policy is paid directly to the beneficiary rather than being put into the deceased person’s estate.

#$$4$ Life insurance policy premiums will increase the older you get to reflect the greater risk of death and therefore a pay-out but, if the premiums become too onerous the older you get, it may not be worth the sacrifices needed to keep them up.

Some people consider life insurance policies a type of savings plan which, if in trust, will pay out to the beneficiaries without inheritance tax but, if the premiums become higher as people live longer, there is the risk they can no longer pay and will get nothing at all if the policy lapses.

Depending on personal circumstances though, some people just don’t need life insurance (no dependents or enough assets to provide for dependents in the event of their death), but if you do, make sure it’s the right policy for you.

Minimizing inheritance taxes

The rise in property prices means estate taxes will rise in a big way…Those who have an inheritance tax obligation must pay this income tax…[but] the good news is that you can do many things during your lifetime to minimize your inheritance taxes.

  • The UK inheritance tax threshold is currently £325,000…[which] rises to £500,000 if you own your home and leave it to your children or grandchildren. A surviving spouse or civil partner can take on any ‘unused’ inheritance tax, so couples will be able to leave homes worth up to £1 million to their children or grandchildren.
  • The standard inheritance tax rate is 40%. Your Inheritance tax bill is only charged on the part of your estate that’s above the threshold…

If you want to limit the amount of inheritance tax liability, you can give what is called an ‘Inheritance tax gift’ under current tax rules. Using your annual tax gift allowance, £3000 per year can be gifted to a loved one annually which does not form part of your estate if you die. Anything over and above that will be taxed on a sliding scale if you die within the next seven years, but no tax will be payable after those seven years.

The same rule applies forgiving away your home if you move out and live for another seven years. If you continue to live in the property after giving it away, you will need to pay rent and bills. The property will only be exempt for inheritance tax purposes if you live for the requisite seven years.

Making a conventional funeral plan

Some people choose to take out a funeral plan that will cover the costs of burial when they die…[but] the money paid to cover the costs doesn’t…[earn] interest…[so,] essentially, funeral plan contributions are a long-term savings plan that doesn’t pay interest.

If the cost of a funeral plan increases with inflation, then there may well be a shortfall for your loved ones to pay. Such shortfalls undermine the reason for utilizing the plan in the first place. A tax-free ISA or another type of asset that maintains its value or increases in value will be just as effective in paying for funeral expenses, and there may even be some money left over.

Gold as an alternative funeral plan

Some people buy gold up to the value of their funeral expenses since the precious metal has continually maintained its worth over centuries. When inflation rises, the value of gold typically rises as well, effectively functioning as a protection against funerary costs.

Gold as an effective way to transfer wealth

Gold is a practical and effective way of transferring wealth to loved ones.

  • It is private, which means that unlike equities, cars or property there is no requirement to register its ownership or a transfer of ownership when it is passed on.
  • It effectively removes wealth from the banking system where the low rate of interest would erode its value as inflation continues to increase the cost of goods. Instead, your wealth is transferred into a physical and tangible asset that can grow tax-free in certain circumstances.

If you are a UK resident and purchase UK gold coins minted by the Royal Mint like Gold Britannia coins or Gold Sovereign coins, any capital gains are tax-free. These coins can also be Capital Gains tax-free when you pass them on as part of your legacy, depending on individual circumstances…

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