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Want a tax avoidance tip? We all want to minimise the tax bill we face, and we like to think that we’re making the most of the loopholes available.  But there’s one simple inheritance tax planning opportunity many people don’t take advantage of.

I’m talking about writing your life insurance policies or pension death benefits in trust.  It’s really very straightforward; simply make sure that the proceeds of your policy or policies are written in trust for your chosen beneficiaries.  A trust is a tax efficient ‘wrapper’ that is designed to hold your death benefits, so instead of the money being paid in to your estate, it’s paid in to your trust.

This means the assets are in effect removed from your estate and crucially are paid free of inheritance tax, no matter what the value of your estate.  Without a trust in place the proceeds would be paid in to your estate and, if this is worth more than £325,000 (or whatever the nil band is at that time), will be taxable at 40%.

As far as your beneficiaries are concerned, there is no issue receiving the monies via trust as your beneficiaries would normally have control of the funds by being trustees.  In many cases they end up with more cash!

We can advise on the most appropriate trust for your circumstances so just give us a call.

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