Posted by Thomas G Kinsella, ATP

Best Ways to Avoid Inheritance Taxes

Best Ways to Avoid Inheritance Taxes

After death, many people love to have their properties go to their heirs. However, inheritance tax limits the value of the property that eventually gets to the recipient. 

This article will explore legal ways to prevent the tax from eating a significant part of your asset before getting to the beneficiary.


  1. Make a Will

One of the essential parts of inheritance planning is making a will, as it ensures that all assets are distributed exactly the way you specified it. The absence of a will subjects the distribution of your asset to the intestacy rule, which involves the inheritance tax. 

As a result, make sure to make a will, which will state how your estate will be allocated after your death. You will not only reduce inheritance tax, but help ensure that the asset is distributed based on what you want. 

  1. Give Your Assets out

For all assets you gave out and were alive within seven years, such gifts will be free, and you can avoid inheritance tax. Death within seven years will warrant the payment of such tax, although on a reducing scale. There is a threshold for gifts you can give every year without having to face the inheritance tax. 

  1. Fix Your Assets in a trust

Assets placed within a trust will not be part of your estate after death, skipping the inheritance tax. In addition, the assets in your trust benefit your children after getting to age 18. Trust is a tax-saving strategy that also helps you control your asset, like a will. 

  1. Consider Taking Life Insurance

An excellent way to cover any liability for inheritance tax is to take life insurance for the projected inheritance tax bill and direct the policy to trust to ensure that it is not paid from your estate. 

  1. Have Gifts from Excess Income 

There is the permission to have a "gift from income" that will not be subjected to Inheritance tax. Gifts that will qualify must be from your main expenditure and income, which will not bring down your standard of living. 

  1. Donate Items not Subjected to Capital Gains

If you have assets that have lost their value since you got them, like shares and properties, you could pass them on without incurring the Capital Gains Tax. This is because recovery in the value of such assets will be added to the recipient's estate. At the same time, any gain will also not be subjected to potential Inheritance tax liability after seven years.

  1. Direct Something to Charity 

Whatever you leave to charity will not be subjected to the inheritance tax. Also, leaving not less than 10% of your entire asset to charity will bring down the inheritance tax rate from 40 to 36%

  1. Spend it

It makes no financial sense to constraint yourself as you grow, striving to leave an inheritance to your kid for them to have to pay a whopping 40% tax on your assets. After you worked hard to build your assets, you should not feel any guilt in enjoying them. 


If you have your entire wealth held in property, there is the option to try an equity release scheme like a home revision scheme or a lifetime mortgage. Depending on your choice, it involves either borrowing money against the home's value or selling some part of your residence for a lower value (lower than the market rate) while you still live there.

With this process, your asset will reduce while the debt against such estate shoots up. The funds can go to future beneficiaries, while you can also spend it. Don’t forget you need to be alive for seven years to remove the inheritance tax. 



Thomas G Kinsella, ATP
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