Inheritance tax is payable on the assets that make up the estate of a deceased person after any allowances have been deducted. The tax law experts at Stirling Ackroyd Legal will be able to guide you through the process of Inheritance Tax planning, to enable you to achieve the most beneficial outcome for your loved ones when the time comes.
Establish the value of assets
An estate is calculated by establishing the value of the assets that you own, before deducting any debts or unpaid bills. Your assets will include your home and any other property that you own, cash, savings, investments, car or other vehicles and any payments from life insurance or death-in-service plans.
The threshold for Inheritance Tax currently stands at £325,000 per person, and your estate will be taxed at 40% over and above this figure, although this is reduced to 36% if you leave at least 10% to charity. For example, if you are a married couple and your only asset is your home that is worth less than £650,000 (£325,000 per person), your beneficiaries will not be liable for Inheritance Tax. This is called the nil-rate band.
Beneficiaries of estates valued below £325,000 do not pay Inheritance Tax.
The ‘main residence allowance’
The main residence allowance, or residence nil rate band, is currently being phased in by the government until 2020. In practice, this means that if parents or grandparents leave a home worth up to £1m, (or £500,000 for single people) this will not be liable for Inheritance Tax.
Couples and inheritance tax
If you are married or you are in a civil partnership, the threshold for each of you before Inheritance Tax becomes payable is £325,000. In addition to this, any assets that are passed to your husband, wife or civil partner upon your death will also be exempt from Inheritance Tax, as long as they are living in the UK.
Let us help you
Inheritance Tax and trusts planning can help you to minimise the Inheritance Tax burden on your beneficiaries when the time comes for your estate to be administered. This can be done perfectly legally and sometimes with considerable benefit, depending on your circumstances. Every situation is different, and our advice will always be tailored to your individual circumstances. Please contact us for more information on how we can help you.
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