How to Prevent Your Inheritance from Being Locked


It can be difficult to prevent your inheritance from being locked. However, there are a few things you can do to make it more difficult for someone to take your inheritance. First, you can put your inheritance in a trust.

This will make it more difficult for someone to take your inheritance because they will have to go through the trust first. Second, you can make sure that your will is up to date and that it clearly states who you want to inherit your estate. Finally, you can talk to a lawyer about your options and make sure that your estate is properly protected.

According to recent statistics published in the FT Advisor, the average inheritance tax bill in the UK has now peaked above £200,000.

Some 22,100 deaths in 2018/19 resulted in an inheritance tax bill, with the average IHT bill hitting £209,502 and rising by 6% when compared with the previous year. IHT is applied to all estates that are worth over £325,000, but a levy of 40% is particularly impactful during an ongoing cost-of-living crisis.

In this post, we’ll explore this issue further, while asking how paying this prevents your own inheritance from being locked.

The Challenges With IHT

One of the most contested issues of IHT is the threshold of £325,000, with this relatively low when you consider that the average cost a home in the UK is now £278,000.

So, the chances are that a growing number of homeowners with additional cash or stock assets will be subjected to IHT in the near term, meaning that people who are far from wealthy could ultimately be hit with a huge 40% levy.

Even aside from the fact that many see IHT as an unjust levy that effectively taxes individuals twice, this is a sum that most families can’t comfortably afford (especially at a time when inflation is fast-approaching double figures in the UK).

Paying IHT and the Risk of Having Your Inheritance Locked

Another common issue associated with IHT is how the tax is structured and subsequently paid.

More specifically, the 40% IHT levy must be paid before you can apply for a Grant of Probate and access the inheritance, meaning that executors cannot distribute the estate to beneficiaries without having settled their outstanding tax bill.

This is the primary reason why some £2 billion of inheritance ends up being locked every single year, as they’re simply unable to pay their tax bill and therefore prevented from gaining a Grant of Probate.

Having a locked estate can be extremely stressful for executors and beneficiaries alike, so it’s important to take steps to resolve this as effectively and legally as possible.

How to Avoid Having a Locked Inheritance

As an executor, a viable option is to take out an executor loan to pay IHT and clear this debt quickly. While this has to be repaid, the debt can be settled out of any inheritance that you may be due, while it prevents estates from being locked and ensures that all beneficiaries can benefit.

However, as an estate holder, it’s possible to minimise the risk of IHT being applied through processes such as ‘gifting’.

Gifting refers to the process of distributing and awarding aspects of your estate up to seven years before your death, whether this is in the form of cash or a corporeal asset like your home.

This would effectively remove the associated asset from the estate, easing any future tax burden and potentially eliminating the IHT charge entirely.

Final Words

If you want to prevent your inheritance from being locked, you should consider creating a trust. A trust can help you to control how your assets are distributed after you die, and can also help to protect your inheritance from creditors. You should also consider creating a will, which can help to ensure that your assets are distributed according to your wishes.



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