Whilst same sex marriage has been achieved or in the pipeline in the United Kingdom (apart from Northern Ireland), many gay and lesbian couples are still in civil partnerships, which grant them all the legal consequences of marriage. As a result, estate planning for the LGBT community should be very similar to a straight person’s estate
planning. Still, here are a few tips for you to consider.
The first thing to think about is inheritance tax; a tax on your estate incurred in the event of your debt. It is also payable on some of your trusts or any gifts you’ve made during your lifetime. The sort of things included in your estate are property, investments, insurance, pension benefits from a private pension policy, assets held in a trust or anything you’ve given away in the previous seven years.
So how much does inheritance tax will you have to pay? Well, up to £325,000 you won’t pay a penny. After this, inheritance tax is levied at 40%. So, say you managed to make a few quid in your later years and your estate value is £1,000,000. The first £325,000 of this is inheritance tax free. The rest (£675,000) is taxed at 40%; meaning you’ll pay the tax man £270,000.
So how can you plan for inheritance tax? In fact, there are a few things you can do to effectively reduce your inheritance tax bill.
Firstly, make a will. An effective will, made with the help of a solicitor, can reduce the amount of inheritance tax you’ll have to pay.
Secondly, if you can afford to give away some of your estate, be it money or property, do so. This will reduce the size of your estate and the amount of inheritance tax you’ll pay. Beware though, gifts given within the seven years prior to your death will still be classed as part of your estate.
Finally, look at exemptions. A suitable solicitor will be able to discuss a number of ways you can leave your estate at least partly free of inheritance tax. Passing your estate to your partner will also not leave them liable to pay inheritance tax.
Other estate planning tips include thinking about life assurance. The proceeds of a good life assurance plan can help loved ones pay for funeral costs or other bills payable once you’ve passed on. There’s recently been a drive to make life assurance premiums for gay men equal, so don’t be put off as it’s now illegal to hike premiums based solely on sexuality.
Finally, consider putting some of your estate in trusts. When done with the help of an advisor, trusts can not only reduce your inheritance tax liability, but offer peace of mind for your family and loved ones.
If you would like to talk to an LGBT-friendly financial adviser about estate planning or any other financial matter, please enter your postcode under the map on the right to find an adviser near you.
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