Inheritance Tax
Do You Know Your Position?
Inheritance Tax (IHT) is a combined gift tax and death duty. It applies to gifts made during a person's lifetime and to his/her estate on death.
The first £312,000 of chargeable transfers (the 'nil rate band' 2008-09) is free of IHT. Amounts in excess of this are taxed at 40%. There is no IHT payable on transfers to a spouse or legal civil partner.
It is worth noting that, upon your death, IHT has to be paid by your personal representative before they are able to administer your estate. This means that any IHT liability cannot be paid directly from your assets, but must be met from other sources; normally bank borrowing.
Many ways exist in which an IHT liability can be reduced in some cases removed altogether.
One or more of the following may be used:
- Make a Will with Succession and Trust Planning incorporated
- Nil Rate Band Discretionary Will Trust
- Revocable Interest in Possession Trust
- Make a Will incorporationg a Business Trust
- Equalisation of estates for married couples or civil partners
- Lifetime Transfers
- Regular use of Annual Exemptions
- Potentially Exempt Transfers
- Use of Relief's (e.g. Business Relief, Agricultural Relief)
- Gift & Loan Trusts
Alternatively
Do nothing and leave it to the government's plan
Alistair Darlings Pre-Budget announcement 9th October 2007
The transfer of any unused Nil Rate band allowance between a surviving spouse or a civil partner does mean a possible allowance on second death of up to £624,000 free of inheritance tax
But Beware!
In order to succeed this allowance has to be claimed and supported by all the relevant documents, including, the original Will, Codicil's, Deed of Variation, a copy of the Grant of Probate, Tax documents and details of any gifts that may have been given out of the first deceased estate, these are required to prove that no IHT allowance had been used. It is possible that many years may have elapsed between the death's and as solicitors store most document for just six years before they are destroyed the ability to prove the claim might be impossible, meaning the loss of the valuable tax allowance and a tax bill of up to £124,000 for your children.
Take Note!
Should your surviving partner remarry, purchase a property jointly with a new partner or maybe include a new beneficiary after a fall out with a member of the family then, your children could be disinherited and receive nothing from your estate.
We Recommend That YOU retain the choice and Make Your Will ensuring that it is professionally written, it could save your loved ones £1,000's.