Inheritance Tax Planning
What is inheritance tax?
It is a form of wealth tax which may be paid on your estate when you die or in some circumstances on lifetime gifts you make. Unfortunately, mainly due to the large increase in the value of houses, it is no longer a tax only paid by the wealthy.
How much would I have to pay?
Broadly speaking, on your death a value is put on everything you own. You pay 40% tax on everything over what is known as the Nil Rate Band (£312,000 for 2008-2009).
If the tax is paid on everything I own why can't I just give everything away before I die?
The government have put in place complicated rules regarding lifetime gifts. In some circumstances assets never stop being regarded as yours for inheritance tax purposes, even if you have given them away. Other times they may still be counted as yours if you die within 7 years of making the gift. In other circumstances there may be an immediate charge to inheritance tax on making the gift even though you are still alive.
Is there anything I can do to avoid or reduce inheritance tax?
Yes, there are lots of different things you can do depending on your circumstances. One of the most common schemes used by an unmarried couple with assets of around £500,000 is making sure that they each use their own Nil Rate Band on death rather than passing everything to the survivor. Generally they want to 'have their cake and eat it,' and make sure assets don't pass to the second to die for inheritance tax purposes, but that the survivor can still use and enjoy those assets. Our solicitors can advise you on how to achieve this and save your family up to £120,000 on the death of the second of you to die. We can also advise on other inheritance tax solutions.
If you have questions regarding anything you have read above, or would like to make an appointment, contact our Wills and Probate Department on 01405 765661.