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Inheritance tax (IHT) is payable at 40 percent on the value of an estate above a certain threshold of a person who has passed away. To avoid taxation as much as is legally possible, many
people choose to take preventative action before they pass away. However, research from Barclays Wealth has shown many people are failing to understand how IHT works - particularly as the
levy relates to certain assets. “There’s clearly still some confusion around exactly how Inheritance Tax works, and a gap between people’s understanding of what they’re leaving to the next
generation, and the reality. “We’d always encourage people to have these conversations with their family ahead of time. “You should also read up on the different allowances and rules around
taxation, to make sure you full understand the implications for your estate - giving yourself enough time to plan and make their most of any allowances. “If you’re at all unsure,
particularly where large figures are involved, consider seeking advice to best understand your position and the options available to you and your family.” Mr Platt also took the time to
share some of the top mistakes Britons often make when planning their estate. Firstly, many in fact leave their estate planning “too late”, meaning their options become somewhat limited. Mr
Platt instead recommended getting one’s affairs in order as soon as possible to make use of tax-free allowances and annual exemptions. Similarly, with regards to exemptions, making the most
of what is on offer is key. Individuals can give tax-free gifts of certain amounts, for example, up to £2,500 for wedding gifts to grandchildren, without this being added to the value of an
estate. When thinking about gifts, Britons are always advised to keep a robust record of what they have given away. This should include when the gift was made, to whom, and the amount, as
this can help to reduce the administrative process for those who are left behind. Mr Platt advised against a failure to take action on Inheritance Tax generally, an issue which commonly
stems from fear of losing control. Research has shown some 35 percent of people think they will lose control over gifts made to family during their lifetime, but this does not have to be the
case. Mr Platt highlighted Discretionary Trusts as a potential option, which can run for up to 125 years and allow individuals to indirectly gift money to certain individuals while keeping
a more flexible approach. While a person is living they will be able to keep some control over how the money is held in Trust, and when an individual passes away, the power will transfer to
a Trustee to manage until the beneficiary takes control. Finally, estate planning can be complex, and thus Mr Platt concluded by strongly recommending people seek advice where possible. It
is also important to note tax rules can change in the future, and estate planning should be based on a person’s individual circumstances. _Do you have a money dilemma which you'd like
a financial expert's opinion on? If you would like to ask one of our finance experts a question, please email your query to [email protected]__. Unfortunately we cannot
respond to every email._