Effective inheritance tax planning could prevent part of your legacy going to the government

The principal inheritance tax planning strategy involves the donor transferring any asset or assets to the intended beneficiary at least seven years before death in order to stop the government getting its hands on any of it.

After the seven years is up, the asset or assets transferred are completely protected from the tax man’s grasp.

However, if a donor does not feel comfortable disposing of their entire estate in this fashion, then there are other inheritance tax planning strategies available to make the eventual transfer of assets more tax efficient.

Everybody is permitted to give away up to three thousand pounds per year to whomever they like without the money being liable to inheritance tax in the event of their death. There is also an entitlement to transfer money to people who have recently married as a tax free gift.

In addition, donors are free to make small gifts of up to £250 freely without risk of incurring an inheritance tax bill for the recipient in the event of their subsequent death.

Readers should also note that cumulative dispositions below a £325,000 threshold are tax exempt.

Peter Lashmar is an accountant who frequently gives helps people with their inheritance tax planning.

He said: “Some elderly people are very happy to engage in inheritance tax planning, and go on live out their final years happy in the knowledge that the tax man will not get his hands on the assets that they wanted their loved ones to enjoy.

“However, in some families the subject of appropriation of assets before or even after death is extremely taboo and is never broached.”

“Ultimately inheritance tax planning is a family matter and anybody who is confused or feels they need help and guidance on the rules in this area should contact a fully independent financial advisor without delay.” He added.