Inheritance Tax Planning

As more and more people own their home, and house prices continue to rise, the number of people affected by Inheritance Tax continues to rise. At the moment Inheritance Tax (IHT) is only payable if the value of the deceased's estate is more than £275,000. The Inheritance Tax rate is currently 40%. The £275,000 threshold can quickly be breached after including the value of your property, possessions and investments.

If the estate (regardless of value) passes simply to your spouse or civil partner (even if seperated, though not divorced or if your civil partnership is dissolved) while you both have permanent homes in the United Kingdom then there is not Inheritance Tax liability. Well known other exemptions are gifts or transfers made more than seven years before death and some other gifts e.g. wedding presents and gifts to charity, political parties and some museums and universities.

Your personal representative or the estate's executor or administrator is liable for paying the inheritance tax due within six months of the date of your death, failing which interest will be charged on the liability.

If your estate is liable to exceed the Inheritance Tax threshold there are options open to you to manage your estate's inheritance tax liability. IHT Planning will likely make use of different kinds of trusts and early transfers of property and assets to take advantage of the seven year rule. Efficient use of your allowances will enable you to ensure that as much of your estate as possible is directed into the hands of those you choose avoiding inheritance tax liability where possible and legal.

Inheritance planning is a complex area of taxation law and the use of a professional inheritance tax adviser is advised. You should ensure that you have a will and that it is kept up to date reflecting your directions for the distribution of your assets. Making a will is an integral part of inheritance planning and specialist advice is recommended, especially if your estate is large.