Five ‘legitimate’ steps you can take to reduce and even avoid paying inheritance tax | Personal Finance | Finance

He explained: “You can nominate beneficiaries for your pension in the event of your death, which must be officially submitted to your pension provider, and IHT is not generally payable.

“If you die after the age of 75 though, your beneficiaries will need to pay income tax on the money they take out of the pension.”

However, Mr Khalaf explained how the amount of income tax paid can be mitigated by withdrawing money from the SIPP gradually.

Setting up a trust can be another option someone could consider when thinking about passing on their wealth.

However, Mr Khalaf explained how trust can be a “complex area” which would definitely require a financial advisor.

He said: “The benefit is that whoever you appoint as the trustee can control the assets, rather than them being passed onto the beneficiaries right away.

“This might be useful if you are concerned about gifting assets to a loved one who is perhaps not renowned for their financial prudence, or perhaps to young grandchildren.

“Trusts can be expensive to run and subject to tax charges, which together with their complexity generally makes them worthwhile in only a few circumstances.”

Mr Khalaf also highlights how investing in some AIM shares can come with inheritance tax benefits, because many stocks on London’s junior market qualify for Business Property Relief.

Though someone must hold the shares for a minimum of two years before they are eligible for this inheritance tax exemption, and not all AIM shares qualify.

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