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Planning for the future and securing your family’s financial well-being is a top priority for our clients, but estate planning can be a complex and often confusing process. One common concern we hear from our clients is about the implications of Inheritance Tax (IHT) for their children.

Inheritance Tax is a tax that is charged on the estate (property, money, and possessions) of someone who has passed away, and in the UK, it is charged at 40% on the value of the estate above a certain threshold. Whether your children will need to pay IHT on your estate depends on the value of your estate and the available allowances. The current standard threshold (or nil-rate band) is £325,000, so if the value of your estate exceeds this threshold, IHT is typically payable at 40% on the amount above £325,000. Other thresholds/allowances may be available, as well as certain reliefs and exemptions, however, these are all circumstance-specific, and therefore it is of great importance to take professional advice.

There are several strategies you can consider to reduce the IHT burden on your estate:

• Gifting: You can give away assets during your lifetime. Gifts made more than seven years before your death are generally exempt from IHT.
• Annual exemptions: You can give away up to £3,000 each year without incurring IHT. This is known as the annual gift allowance.
• Charitable donations: Leaving a portion of your estate to charity can reduce the overall IHT rate applied to your estate.
• Trusts: Setting up trusts can help manage and protect your assets while potentially reducing IHT.

Inheritance Tax laws can be complex and subject to change. Consulting with a solicitor ensures that you receive up-to-date and personalised advice tailored to your specific circumstances. At Macnabs, we can help you understand your options, implement effective strategies, and ensure your estate plan minimises the IHT burden on your loved ones.