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How To Avoid Inheritance Tax On Property
| Inheritance tax, also known as IHT or death duty, is a type of federal tax imposed on those who have inherited assets from a deceased person. Unlike estate tax, inheritance tax is entirely dependant on the value of the property received by the heir or beneficiary. |
In several cases, heirs are compelled to sell the entire inherited property to pay the inheritance taxes. It is unfortunate that one needs to shell down thousands of dollars in the form of taxes even after dying. However, one can avoid inheritance taxes through careful lifetime planning.
Spouse exemption: If the property is transferred to surviving spouse, such transfers are exempted from inheritance tax.
Charitable donations: According to law, gifts made to charities during the lifetime of the deceased or through his will are exempted form IHT. Charitable donations can be made to political parties, national schemes and employee trusts.
Will: A well-drafted will solves many a mysteries and ambiguity related to property.
Marriage Gifts: Gifts made by parents to a child on their marriage are exempt from IHT. Even, marriage gifts made by the grandparents or any other person are also exempt. Hence, it is important to keep a record of all the marriage gifts made during lifetime, as they might be helpful in reducing the IHT burden.
Gifts out of income: Gifts that are made out of income are IHT-free. However, evidence is required to show that these gifts are made regularly.
Using annual exemption: Every year, certain amount of taxable amount can be used to make a gift to a person or any trust. In addition, any unused exemption from the previous tax year can be carried forward to the current tax year. Over a long run, this exemption is highly useful in reducing the burden.
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How To Avoid Inheritance Tax On Property
