There is nothing more certain than death and taxes and it is ironic that even death has some tax attached to it in the form of inheritance tax. Inheritance tax or IHT is what you have to pay based on the monetary value of your wealth after your demise. The assets that are taxable include your property, jewellery, artworks and cars. Inheritance tax is a government tax on the percentage of the value of a deceased person’s estate, often paid by the heir or inheritor of the estate.
Inheritance tax is difficult to calculate and can take a lot of money from your estate. Inheritance tax is calculated at 40 percent of all assets held globally, with an exemption of the first £325,000 and some reliefs do apply.
The following factors play a major role in determining how much inheritance tax your estate is liable to remit to the government.
The HMRC has different tax rates based on your country of domicile, which doesn’t have to be similar to the country used for your income tax
Spouses and civil partners can receive a maximum £325,000 before IHT while unmarried partners do not have the same rights under IHT laws. Where the estate is left to a non-exempt recipient, the £325,000 nil rate threshold also applies.
Where your assets are located both in the United Kingdom and globally. Assets located abroad will be liable to UK inheritance tax
What your estate comprises of i.e. land, houses, cash, bonds, artworks, antiques etc.
Inheritance tax has a significant impact on your property value. But through careful planning, you will be able to make efficient use of your inheritance tax ‘allowance’ available on death. It would help if you started planning your inheritable properties or estates to avoid hanky-panky situations. Here are a few tips for inheritance tax planning.
There are lots of people today who have no Will, while some who do are yet to make updates that reflect the current changes. Tax rules and rates are always changing, and it is imperative to be on the lookout and ensure there is no conflict on your Will. By not having a Will, your estate might end up with the wrong person or perhaps trigger an increase in the IHT bill. By directing your wealth or property to a spouse or probably, civil partner, it is possible to secure an absolute IHT exemption. Although this might not work out if the said spouse is not a domiciliary of your country.
When you make a lifetime gift to individuals, the government automatically exempts it from IHT. In other words, If the person can survive 7 years from when you make this gift, your children or family won’t have to pay Inheritance Tax (IHT) for that gift.
If this is appropriately structured, assets placed on trust will not be subject to IHT. Furthermore, it can provide control over the generation’s use of wealth. However, some IHT charges often apply to a particular trust. If you’re planning to retire in another country, consider if this medium is the best way to hold wealth there, as some countries don’t recognize trust planning.
One logical way to reduce inheritance tax is probably leaving for a country where such doesn’t exist. However, IHT exposure might continue for some specific period.
Our Wills and Estate Planning team at City Legal can assist you in planning for Inheritance Tax for your beneficiaries. We can assist in setting up a Will as well as make necessary recommendations for setting up a Will trust. We are a multi award winning law firm and pride ourselves in being approachable, innovative and always going that extra mile to make sure our clients receive the individual attention they deserve. Our estate planning team maintains a high reputation and is committed to provide clear, transparent and reliable advice to our clients.