Estate Planning
Inheritance Tax
Inheritance Tax (IHT) is a tax which may be paid on your estate (your money, possessions and your share of any property) when you die. This reduces how much value will ultimately pass to your beneficiaries. Your beneficiaries are the people you want to leave your money and assets to when you die.
Inheritance Tax may also be payable on certain gifts you make while you are still alive.
The tax is levied on the worldwide assets of ‘UK domiciled individuals’ (people whose permanent home is in the UK). It also applies to the UK assets of people who live abroad.
That means if you’re a UK citizen and you have a holiday home abroad, it still counts as part of your estate for IHT purposes. Similarly, if you’re a foreign national but have UK property or assets, you’ll be liable for UK Inheritance Tax if the value of those assets come to more than the nil rate band allowance.
Inheritance Tax for married couples
Being married or in a civil partnership can bring some major benefits when it comes to IHT.
If your Will passes all your assets to your wife, husband or registered civil partner, then there won’t normally be any IHT to pay. What’s more, your nil-rate band won’t be used at all – so your surviving partner can effectively double theirs.
It’s up to the legal personal representatives of the second spouse or civil partner to claim the transfer of the unused nil-rate band when the second partner dies. Doing so can reduce the Inheritance Tax that’s due on assets passed down to your children, or other family and friends.
As with all things seeking good advice both legally in terms of ensuring your Will is up to date (visit www.richardsonswills.co.uk) and clear financial advice to maximize the use of allowances and exemptions, is invaluable.
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