1. Draft a will
The only way to avoid intestacy and ensure your estate is distributed the way you want it to be. If you're married or in a civil partnership, you can leave everything to your spouse or civil partner and no IHT is due because they qualify as exempt beneficiaries.
2. Get hitched
To repeat, when an estate passes between a husband and wife, or between civil partners, no IHT is due. What's more, married couples and civil partners can transfer any unused IHT allowance to the surviving spouse or civil partner when they die.
3. Gift away assets
Giving away assets while you're alive is another way to avoid paying IHT. Beware, however: for the purposes of calculating IHT, assets given to others within seven years of your death may, depending on the circumstances, be included in your taxable estate.
If you live for seven years after you make a gift, rest assured no IHT is payable on the value of the assets transferred. If you die within three to seven years of making the gift, and no exemption applies, IHT may be payable, but taper relief could reduce the amount due.
4. Set up a discounted gift trust or a loan trust
Setting up a discounted gift trust involves giving away capital in return for a life-long income. A fixed proportion of the gift falls immediately outside your estate for IHT purposes. After seven years, provided you're still alive, the whole of the gifted amount falls outside the estate.
With loan trusts, you make a payment to a trust, which is treated as an interest-free loan to the trustees. The trust then repays your loan in capital instalments, giving you an income. When you die, any outstanding loan forms part of your estate.
5. Take out an equity release plan
With an equity release plan you can either borrow money against the value of your home (known as a lifetime mortgage), or sell part of your home at a reduced market rate, but remain living there throughout your life (a home reversion scheme). You can use the resulting income stream or capital in any number of ways to decrease the value of your estate for IHT purposes.
** Additional Information & Advice **
Always seek advice from an independent financial planner and a solicitor who specialises in tax law before pursuing any tax avoidance scheme. You can be matched with solicitor in your area for free via solicitor matching services, which can also help you to understand the best course of action for your situation and whether you are ready to hire a solicitor.