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Grandparents warned of 'important thing to consider' to reduce inheritance tax

Updated: Jun 18

equity release

As Inheritance Tax (IHT) Receipts are on the rise, more and more people are being caught in the net and forced to pay thousands in inheritance tax. To mitigate loss and reduce a potentially hefty bill, parents and grandparents are reminded of the “important things” which could save thousands.

Inheritance tax (IHT) is paid on property, money and savings which can prove costly for grandparents passing on wealth to loved ones.

Katie Brain, consumer banking expert at Defaqto shared different options people can consider to save thousands on their bill, that included releasing equity from your home.

She said: “Grandparents/parents could use the equity in their property to help out the family early. Equity Release can be a useful product to consider when reviewing your estate for inheritance tax planning.

“Releasing equity from your home would reduce the value of your property and either reduce the Inheritance tax bill upon death, or the estate may fall under the threshold completely, provided the equity released is spent and not invested.

If the equity released is gifted to others such as family members, this will be exempt from inheritance tax provided someone lives for seven years from the date of the gift.”

The example she gave was for a property worth £750,000.

The inheritance tax threshold is £325,000. After this people are charged 40 percent.

If the homeowners release £325,000 via equity release, their property would not incur any inheritance tax liability.

Equity release should always be carefully considered as the interest is rolled up, so it can be costly.

If you would further like to explore how to help your family out now, why not contact us for a free no obligation consultation.

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