FAQ: are there other ways to save IHT?

Are there other ways in which I can help my beneficiaries to save IHT?

Almost certainly, yes. The introduction gives details of the four main strategies by which a potential liability to IHT can be reduced. These are:

• ensuring that no IHT is unnecessarily paid: for example, ensuring that a term life insurance policy is written under a trust arrangement and does not form part of your estate on death;

• making gifts using some of the many exemptions available;

• owning assets that will have an IHT exemption on death; and

• of course using a scheme like CWIP that builds up a sum outside your estate which can be used (if the beneficiary so wishes) towards the payment of the IHT due on your death.

What is the most important step to take in reducing an IHT liability?

If you have a spouse or a registered partner by virtue of the Civil Partnership Act 2004, providing wills are property structured, no IHT liability will arise until the death of the survivor of that couple. Additionally, properly structured wills will ensure that, on the death of the first of the couple, full use is made of the IHT personal exemption (£285,000 for this current tax year) of the person dying. It is possible for wills to be drafted so that the survivor has access to the combined estates, but still using the personal IHT exemption of the first to die. This can give an IHT saving of £114,000 (40% of £285,000).