Historically, inheritance tax planning was something that affected only the rich and the affluent. But this is no longer the case. Inheritance tax or IHT is proving to be a critical topic of concern for people with average incomes but want the majority of their wealth to directly benefit their heirs. Are you one of them? Proper inheritance tax planning provides different kinds of tools that can help you mitigate inheritance tax liabilities.
IHT: The Good and the Bad
Many people think of inheritance tax as an unfair policy, but it actually has its benefits. For one, it can help reduce income inequality. Inheritance tax helps level the playing field for the haves and have-nots. It helps remove high amounts of wealth from estates all the while preserving a majority of currency over the exemption amount. Tax collected also goes into funding for programmes that benefit the general population, ranging from infrastructure to security and all the way to social programmes.
IHT is seen as income redistribution. To some degree, IHT allows a person’s success to die with them, as the government gets to pull out a huge chunk of wealth from that person’s assets and redistributes it to others who haven’t reached the same level of success. Many supporters also say that IHT increases charitable giving. People who do inheritance tax planning frequently reduce their liability by increasing their charitable donations. This is done as an attempt to reduce net worth, which is ultimately beneficial in terms of funding different philanthropic efforts.
Planning is Essential
On the other hand, did you know that IHT may force surviving families to sell their businesses? A lot of small business owners fall through the IHT cracks because of high tax requirements that force them to give up their assets or go out of business. Don’t let this happen to you – talk to an estate planner to ensure that the wealth you’ve worked so hard to build goes to your rightful heirs. One of the best benefits of IHT planning is minimising taxes on assets being transferred to your loved ones, allowing them to get the bulk of your wealth instead of it going to the state.
