Best Way On How To Cut Your Inheritance Taxes
If you believe that your estate may need you to pay inheritance tax, we’ve gathered for you 5 simple and easy ways to reduce taxes significantly. Here are the best 5 ways to reduce tax without changing anything in your will. Here are 5 ways on How To Cut Your Inheritance Taxes :
1. How To Leave Your Assets As A Gift In Your Will
You might be able to win against Inheritance Tax by simply giving away your estate, setting up a trust or changing your will. But be careful to pay attention to any legal consequences you may have afterwards.
If you are married or are in a civil partnership, you can give anything you own at the moment to your wife/husband or civil partner, in some states or countries this will not be possible if the other person was not born in the same country or the amount you may be limited to a specific amount. Using this method you will not have to pay Inheritance Tax on the price of the gift/s.
Some of the rules when gifting are complicated so you might need to take some legal advice.
2. How To Give Your Estate To Your Family Or Friends
The second advice on How To Cut Your Inheritance Taxes is : When you give anything to one of your friends or a family member that you are not married to, the price of the gift will still be included in your Inheritance Tax for your assets, but only for the next 7 years.
Thus, if giving your children some money and then living more than 7 years, it will not be taken into consideration when calculating the inheritance tax after your death.
The catch is that you can give away only limited amounts of money every single year so that you will not have to pay inheritance tax.
So, you can give away no more than $3000 a year, but you can give to your children and/or grandchildren when they are getting married.
But the thing is that you need to be aware of Capital Gains Tax as sometimes you may need to pay for certain estate.
The safest route is by checking with your lawyer or accountant if you are not sure if you need to pay Capital Gains Tax or not.
3. How To Put Your Assets Into A Trust
The third advice on How To Cut Your Inheritance Taxes is : If you put in a trust a part of your money, property or things that you have invested into out of witch no children of yours or spouse will be able to benefit from, you will no longer need to pay Inheritance Tax for it.
So, you can set up a trust for your legal (over 18) children, pay for your grandchildren education or even pay for a family member’s medical bills.
You can make a trust right now or you can put it in your will. How To Make Your Will – Step By Step Guide
There again can be Capital Gains Tax consequences if you transfer certain estate into a trust during your life, but no Capital Gains Tax will exist if you create a trust in your will
Keep in mind the fact that a few types of trusts can be subjected to their own tax regimes and the trust might be subjected to its own inheritance tax.
Also, persons that benefit from a trust are likely to have to pay 45% on Income Tax and 28% Capital Gains Tax.
Some rules about trusts can be complicated so you should seek advice from an expert.
4. How Leaving Something To Charity Will Help You Not Pay Taxes
The forth advice on How To Cut Your Inheritance Taxes is : Everything that you give to a charity will be free of inheritance tax, thus it can be a good way to reduce your inheritance tax, and at the same time do a good cause.
If you are going to leave 10% of your assets to charity, it will cut how much inheritance tax is due on the rest.
That way, the calculation rate for the inheritance tax sill be only 36%, instead of 40%.
The rate is going to be against the balance of the assets that exceed $325 000, but it can be lowered by gifting certain assets.
You may think that this is not a big saving, but it means that your family and your friends are going to receive more stuff than they would otherwise, and at the same time a charity will also benefit.
5. How To Take Out Life Insurance And Reduce Tax
If you are going to take out the life insurance policy, it will not reduce the amount of inheritance tax to pay on your estate, but the payout may make it easier for your family and/ or friends to pay the taxes.
It can mean that because of this they will be able to prevent the family house from being sold
If you are going to do this step, you need to make sure that the life insurance payout will go into a trust, in contrary, it will make your estate bigger and they will have to pay even more.