How to Avoid Inheritance Tax with a Deed of Assignment

Inheritance tax is a tax imposed on the estate of a deceased person. It is paid by the beneficiaries of the estate, and can be a significant burden. Fortunately, there are ways to reduce or even avoid inheritance tax, such as using a deed of assignment. In this article, we will explain what a deed of assignment is and how it can be used to avoid inheritance tax.

What is a Deed of Assignment?

A deed of assignment is a legal document that transfers ownership of an asset from one person to another.

It is commonly used in estate planning to transfer ownership of assets from the deceased to their beneficiaries. The deed of assignment must be signed by both parties and witnessed by an independent third party.

How Can a Deed of Assignment Help Avoid Inheritance Tax?

Inheritance tax is calculated based on the value of the estate at the time of death. By transferring ownership of assets to beneficiaries before death, the value of the estate can be reduced, resulting in lower inheritance tax liability. This can be done through a deed of assignment. For example, if an individual owns a property worth £500,000 and wishes to transfer it to their children before death, they can do so using a deed of assignment.

This will reduce the value of their estate and result in lower inheritance tax liability for their beneficiaries.

What Are the Risks Involved?

Although using a deed of assignment can help reduce or avoid inheritance tax, there are some risks involved. For example, if the asset is transferred too close to death, it may be considered as part of the estate and subject to inheritance tax. Additionally, if the asset is transferred for less than its market value, it may be subject to capital gains tax.

What Are the Alternatives?

In addition to using a deed of assignment, there are other ways to reduce or avoid inheritance tax. For example, individuals can make use of exemptions such as the annual exemption or transferable nil-rate band.

Additionally, individuals can make use of trusts or gifts to reduce their inheritance tax liability.

Conclusion

Inheritance tax can be a significant burden for beneficiaries. A deed of assignment is a legal document that transfers ownership of an asset from one person to another. By transferring ownership of assets before death, the value of the estate can be reduced and result in lower inheritance tax liability for beneficiaries. However, there are some risks involved and individuals should seek professional advice before proceeding.