Inheritance tax is one of the most complex, difficult and often misunderstood elements in regards to financial planning. Too many times people, friends or families end up facing unexpected and unnecessary burdens because this aspect of strategic and timely planning was neglected and now it is left up to them to sort things out. If you consider that inheritance tax planning is only for the rich, then you are terribly mistaken. Everyone can benefit from the advantages proper planning brings, advantages which help minimise the inheritance tax liability.

That is one of the many mistakes people make when dealing with wealth management. But, doing things ahead of time, in a correct and beneficial manner, can help your loved ones navigate the process easier when the time comes. Read more to see what are some of the main mistakes commoners and rich people alike often make when planning for inheritance tax.

Mistake No. 1 in Inheritance Tax Planning: Not Planning Ahead of Time

You might be aware that leaving things for the last minute is not a good practice when it comes to inheritance tax planning. It’s not a good practice any way, but it is all the more relevant when it comes to this time-bound topic. This mistake is not only common, but it is also costly.

Most people avoid getting started because they don't find their assets valuable enough, and that is where the main issue comes from. However, the sooner you get it done, the more options you have when it comes to managing and reducing inheritance tax liability.

Planning doesn't always refer to papers and bureaucracy, sometimes it refers to something as simple as making gifts. Yes, you heard that right. As long as you live for at least seven years after giving out a gift, it might fall out of your estate. This is known as the 7-year rule and it is one of the ways in which you can take advantage of estate planning strategies. But to be able to do that, you'd have to start planning early and way ahead of time and unfortunately, that is what most people fail to do.

Mistake No. 2: Estimating the Wrong Value

Take a moment to think of all the elements that you consider fall within the total value of your estate. Now that you have that in mind, take a look at the actual number of aspects that are considered:

• Property
• Savings
• Bank accounts
• Business assets
• Life insurance policies
• Art
• Jewellery
• Antiques
• Other valuable items

Did you know there are that many? Or did you stop at bank accounts? This is whny you need a professional evaluator to determine your wealth. Without pne, you might be exceeding the IHT without even knowing it. But even if you had your estate valued, it would be best that you do it again every five years. You'd be surprised to see how much value can fluctuate with time.

Mistake No. 3: Not Knowing How to Minimise Inheritance Tax Liability

Inheritance tax liability represents the amount of money that has to be paid when a person inherits something. You might think there is no way for you to avoid this tax and make sure you're loved ones get a full hold of the assets, but there are a few loopholes in legislation which stipulate that:

• If your total estate wealth is under the £325,000 threshold
or
• If you leave everything above that sum to your spouse, civil partner, a charity or a community amateur sports club

Then, under these two conditions, the UK law ( https://www.gov.uk/inheritance-tax ) stipulates that you can avoid the liability entirely.

Mistake No. 4: Not Considering or Downplaying the Importance of Trusts

This is probably one of the most common mistakes people make in inheritance tax planning. Not many know that they can reduce their inheritance tax liability with the use of a trust. By transferring parts of your wealth into a trust ahead of time, you can lower and remove parts of your estate, which reduces your inheritance tax liability.

However, there is a reason people often forgo this option, and that is because, to an untrained eye, the option can appear to be rather confusing. But, you should not allow that to keep you away from a money-saving opportunity. The best thing you can do if you want to see for yourself how a trust can help you make the most of what you have is to contract a specialised firm that deals with inheritance tax planning ( https://nope.tax/ ). They can offer you all the information and support you may need in setting up a trust.

Mistake No.5: Not Reviewing the Will Regularly

Life is full of events which, at the time of their occurrence, can keep us rather focused on them and create that tunnel-vision for most people. In inheritance tax planning, that can be very detrimental, because those events, such as weddings, anniversaries, and births, while joyful indeed, do bring changes that are normally inscribed in a will.

If you want the new members joining or being born into your family to have a share of your wealth, then you might want to revisit that will every now and then, either to add or to subtract from the list of beneficiaries.

Conclusion

If there’s one thing that you take with at the end of this, let it be that inheritance tax planning is not only for the wealthy and that inheritance tax liability is something you can lower with the right help. Specialised services in the UK have the knowledge and information needed for you to learn the best way to transfer your wealth to the next generation to come. If you’ve recently developed an interest in this topic, then you should read more articles to get yourself accustomed to the terminology and, once you’re confident in your understanding, you should contact a specialised firm to guide you throughout the process. Dealing with wealth management can seem like a lot at first, but it doesn’t have to be complicated – not when you have professional help on the side.