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How trusts can reduce your inheritance tax bill
Podcast summary created with Snipd AI
Quick takeaways
- Setting up a trust allows individuals to control asset distribution and potentially reduce their inheritance tax liabilities effectively.
- Understanding the specifics of different trusts and their tax implications is crucial for maximizing benefits and avoiding pitfalls in estate planning.
Deep dives
Understanding Inheritance Tax Implications
Inheritance tax is a significant concern for many individuals, especially with the UK's threshold being frozen until 2030, which prompts greater scrutiny of liabilities. The headline rate for inheritance tax stands at 40%, but gifts made within seven years of the giver’s death are subject to lower rates, encouraging people to consider lifetime gifts to reduce their estate value. Individuals can leave up to £1 million tax-free to children or grandchildren by inheriting combined allowances, but exceeding an estate value of £2 million results in reduced allowances. This context has led to increased interest in effective strategies for minimizing inheritance tax burdens, particularly in light of forthcoming changes to pension exemptions starting in 2027.
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