Lifetime planning and Inheritance tax…
Writing your Will and lifetime planning is an important part of preparing for the future.
Inheritance tax may be payable on your death depending upon the value of your estate when you die. There is an allowance for each person’s estate before inheritance tax is payable which, on current figures, is £325,000, known as “the Nil-Rate Band”. Subject to certain conditions, where you own your own house and leave it to your children, your estate can also qualify for an additional allowance of up to £175,000 known as “the Residence Nil-Rate Band”.
These allowances are transferable between spouses or civil partners. For example, if the first to die leaves everything to the survivor of them, then their entire estate is exempt from inheritance tax. In this case, on the subsequent death of the second of them, their estate would benefit from a doubling of the nil-rate band ie their estate would need to exceed £650,000 before any inheritance tax was payable. If they are also eligible for the Residence Nil-Rate Band then their estate will need to exceed £1m before any inheritance tax is payable. Any sum over and above any Nil-Rate Band allowance is taxable at 40%.
It is therefore important that you look at estate planning to consider mitigating any inheritance tax payable on your death. This can be done in a number of ways including writing a tax-efficient Will, lifetime giving, considering charities and/or managing your inheritance tax liability by making use of all available exemptions and reliefs.
It is also worth bearing in mind that if you are a beneficiary of someone’s estate and you do not “need” these funds, it may be possible to re-write the person’s Will after their death. Most people do this to pass the inheritance onto their own children by what is known as a Deed of Variation. Providing this is done within two years of the death and the appropriate elections are made in the Deed the gift will be treated as having been made by the Deceased rather than you for inheritance tax purposes.
If you are planning to write or update a Will or require assistance with lifetime planning in regard to your estate…Talk to Tollers on 01604 258558, our experienced Trusts and Estates team is on hand to guide you through the process.