Inheritance Tax Planning - Ways To Reduce Inheritance Tax

It is a good idea to plan your financial affairs so that you can reduce the amount of inheritance tax that has to be paid. A major way to do this is available to you if you have a spouse. This is because anything that is left to your spouse is inheritance tax free no matter how much you leave them. It is not necessary however to leave everything to your spouse as you can leave an amount up to your inheritance tax free allowance to your children for example and the remainder to your spouse and then you would pay no inheritance tax.

Then later on when your spouse dies they can leave another amount equivalent to the current level of inheritance tax free allowance to your children which means in effect your children get to receive double the amount of money free of inheritance tax than if you had passed your money directly on to them instead of to your spouse.

Another way to reduce inheritance tax is to gift some of your money to your chosen beneficiaries whilst you are still alive.

If you do not wish to or are unable to do the above options, then another way to plan for paying inheritance tax is to take out a life insurance policy which would pay out in the event of your death to cover the inheritance tax bill.