Frequently
Asked Questions
Below
is a list of Frequently Asked Questions and the answers to them. If you have any
further queries please do not hesitate to contact us on 01727 737610.
What
does "Estate" and "Assets" means? Broadly
speaking your estate is everything you own at the time of your death, less what
you owe. Assets include things like property, possessions,
money and investments. What is Inheritance Tax (IHT)?
Inheritance
Tax is payable on death on the value of an individuals assets that exceed the
nil rate band, currently £325,000.
The current rate of tax is 40%.
For a married couple the inheritance
tax will be charged on the balance of estates over £650,000. What has the effect been of
the recent Pre-Budget
Report (9 October 2007)?
Prior to the recent
legislation, where assets were left to the surviving spouse a nil rate band (now
£325,000) would effectively be lost, resulting in an additional £130,000
IHT liability on estates of £650,000 or more. This was due to the surviving
spouse only being able to utilise one nil rate band on their death.
As
of 9 October 2007, a surviving spouse can now use up to double the nil rate band
on second death. The level of nil rate band will be that applicable at the date
of second death. The level of nil rate band will be that applicable at the date of second death. Do
'Trusts' therefore still have a role to play? Absolutely
- irrespective of the size of your estate. Click here
for details of the benefits of placing assets into trust during your lifetime
and on first and second death. Are there any exceptions? If
your estate passes to your husband, wife or civil partner and you are both domiciled
in the UK there is no Inheritance Tax to pay even if it's above the IHT threshold
- this is known as 'inter-spouse exemption'. Most gifts or
transfers made more than seven years before your death are exempt. Certain
other gifts, such as wedding gifts and gifts in anticipation of a civil partnership
up to £5,000 (depending on the relationship between the donor and the recipient),
gifts to charity, and £3,000 given away each year are also exempt. Why
is IHT affecting an increasing number of people? The increasing
wealth of Middle England, particularly the huge house price increases and the
fact that IHT allowances have not kept pace with these increases. Also, as a percentage,
fewer people are doing anything about it as there is a common misconception that
costs of expensive city solicitors means Estate Planning is just not worth it.
This is incorrect. Estate Planning is readily available and can save your loved
ones hundreds of thousands of pounds. Who pays the inheritance
tax on an estate? The 'personal representative' (the person
nominated to handle the affairs of the deceased person) arranges to value the
estate and pay any Inheritance Tax that is due. You usually
nominate the personal representative in your will (you can nominate more than
one), in which case they are known as the 'executor'. If you die without leaving
a will a court can nominate the personal representative, in which case they are
known as the 'administrator'. The assets within the deceased's
estate ARE NOT always accessible until the inheritance tax liability on the estate
has been paid. This can cause major problems for your beneficiaries at what is
usually a very difficult time. When must the inheritance
tax be paid? In most cases, Inheritance Tax must be paid
within six months from the end of the month in which the death occurs, otherwise
interest is charged on the amount owing. Tax on some assets,
including land and buildings, can be deferred and paid in instalments over 10
years. What steps can be taken to mitigate the IHT liability
on your estate? Click here
for details of the benefits of placing assets into trust during your lifetime
and on first and second death. | 
