Leaving money to your loved ones after you die is a common and most keenly felt financial goal.

But being able to leave a generous inheritance behind isn’t something that can happen by chance. It can take careful planning, and making sure you get the right financial advice.

For example, if your estate is worth more than £325,000, you have to pay inheritance tax on everything above this threshold, at a rate of 40 per cent.

That can work out to a significant amount of money, and means you could leave far less to your loved ones than you might wish for or expect.

However, there are steps you can take to reduce the amount you pay in inheritance tax. So if you plan ahead, you can be confident that the vast majority of your assets will go to your intended beneficiaries.

For example, you could leave gifts to loved ones before you die. But if you decide to pursue this option, you should be aware there are several rules that apply.

You don’t have to pay inheritance tax on any gifts if you live for seven years after you give them. But of course, you can’t ever know when you’ll pass away, so you should be aware that if you die less than seven years after making the gift, inheritance tax will still apply.

Money, property and personal items such as antiques and jewellery can all be classed as a gift for inheritance tax purposes. Stocks and shares listed on the London Stock Exchange and unlisted shares that had been held for less than two years before your death, can also be considered as such.

Another option that’s open to you if you want to maximise the amount you leave to your family is to bequeath a gift to charity.

You can reduce your inheritance tax rate from 40 per cent to 36 per cent if you leave more than a tenth of the total of your estate to a charitable organisation – and that could save you a huge amount of money in tax payments, depending on how big your estate is.

Simply state your intentions in your Will, with clear details of which organisation you want to leave money to, and you could be able to leave much more money to your loved ones as a result, along with supporting a good cause that means something to you.

A further option worth exploring is to see if your estate qualifies for the residence nil rate band (RNRB). The RNRB is an allowance that lets you reduce the amount of inheritance tax you pay when passing on your main residence. 

Using an online calculator on the Gov.uk website, you can work out how much residence nil rate band your estate may qualify for.

As you plan your financial future to make sure you’re able to leave a healthy inheritance behind, it can be easy to forget about inheritance tax planning. That’s partly because, for many years, it’s often been regarded as something that only the super-wealthy have to think about.

But the average house price in July 2022 was £292,000, which is £39,000 higher than it was a year earlier. This isn’t very far below the inheritance tax threshold of £325,000, so it’s easy to see how more and more people are finding themselves having to pay this charge, without taking steps to reduce what they have to pay.

Inheritance tax is a complex area of taxation, so it’s well worth getting professional, regulated financial advice if you don’t want to pay more than you have to. A specialist in this field can talk you through all your options, so you can make informed decisions that help you achieve your financial goals.

Please don’t hesitate to get in touch with us and we’ll be happy to speak with you.