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. One of these is through the use of a deed of family arrangement.
A deed of family arrangement is an agreement between family members that sets out how the estate of a deceased person will be divided. It can be used to reduce or even avoid inheritance tax, as it allows for the transfer of assets from one family member to another without incurring any tax liability. The deed of family arrangement must be signed by all parties involved and must be approved by the court. It must also meet certain criteria in order to be valid.
For example, it must not be used to defraud creditors or to avoid paying taxes. In order for a deed of family arrangement to be effective in avoiding inheritance tax, it must be carefully drafted and reviewed by a qualified lawyer. The lawyer will ensure that all legal requirements are met and that the deed is valid and enforceable. Once the deed has been drafted and approved, it must be registered with HM Revenue & Customs (HMRC).
This will ensure that any assets transferred under the deed are exempt from inheritance tax. When using a deed of family arrangement to avoid inheritance tax, it is important to remember that it is only effective if all parties involved agree to it. If any party does not agree, then the deed will not be valid and inheritance tax may still be payable. It is also important to note that a deed of family arrangement cannot be used to avoid paying other taxes such as capital gains tax or income tax.
It is only effective in avoiding inheritance tax. Using a deed of family arrangement can be an effective way to reduce or even avoid inheritance tax. However, it is important to seek professional advice before entering into such an agreement, as there are many legal requirements that must be met in order for it to be valid and enforceable.
