BENEFICIARIES of inheritance in the South West are set to face an average inheritance tax (IHT) bill of £169,663 according to figures released by HMRC. With nearly 25,000 UK households affected by IHT last year, it is becoming increasingly important for people to put a clear IHT plan in place.

This will help reduce the tax being paid on the estate on death, will ensure that their legacy is dispersed according to their wishes, and to ease the stress among the remaining family members.

Peter Finningan, Head of Bath (Portfolio Management) Sanlam UK, shares several tips on how to approach IHT:

Start planning, and start sharing

As you’re not going to be around to help, there are things you can do to ease the pressure on your family. Proper planning now can mean you can leave more to your loved ones and less to the taxman as well as offer peace of mind for your family.

Five top tips for IHT planning:

• Make sure you have a will in place and ensure it is reviewed and up-to-date – Your will should reflect your current wishes and take into account your family’s particular circumstances.

• Make sure your financial planning takes into consideration all aspects of your wealth – Make sure you always have an emergency pot of cash that allows you to have quick access to liquid cash. 

• Use gifting to limit exposure – It makes sense from a tax perspective to plan ahead and make gifts during your lifetime so that those are classed as potentially exempt transfers, potentially free of IHT. Another option is to donate it to charity as those donations would be exempt of IHT.

• Make full use of available allowances and reliefs – There are several important ones that you should be aware of. Perhaps the most relevant one to consider is the "spouse exemption" which allows everything to pass to a surviving spouse (or civil partner) free of tax.

• Be on the same wavelength as your loved ones – It is important that your family is aware of your wishes and that correct provisions are made ahead. Talking about this subject can be uncomfortable at times, but it’s worth it in the long run.

Inheritance tax planning can seem overwhelming, so getting professional advice is a sensible step. Not only can an adviser reduce the stress of the decision-making process, they can also ensure that the decisions are the most suitable for your situation.  The key, however, is to take it as soon as possible, and to share your plans with your family. The more informed they are now, the easier it will be when the plans need to be executed.

The rise of IHT

Of course, you have no way of knowing how buoyant the property market will be when you die, but it’s important to consider the fact that your home may not sell quickly.