A wealthy 49-year-old individual wants to minimise the potential inheritance tax that may be levied on their estate after their death.
Which of the following actions will not reduce the potential inheritance tax liability on the man's estate when he dies?
A wealthy 49-year-old individual wants to minimise the potential inheritance tax that may be levied on their estate after their death.
Which of the following actions will not reduce the potential inheritance tax liability on the man's estate when he dies?
Changing the terms of his will so that the residue of his estate goes to his grandchildren rather than his children.
The "skipping a generation" inheritance tax planning method is a popular technique that maximizes the inheritance received by future generations. This method ensures that inheritance tax is only charged once when the estate residue is passed down to the man's grandchildren. If the residue had been left to the man's children and they later transferred the assets to their own children, then two charges to inheritance tax would arise.
However, it's important to note that skipping a generation would not reduce the potential inheritance tax liability on the man's estate upon his death, as legacies left to both children and grandchildren are equally chargeable to inheritance tax. Other options may potentially minimize the inheritance tax liability on the man's estate.