Time to think about Inheritance Tax...
What exactly is Inheritance Tax?Let's dispel a myth right here and now. You don't have to be rich for your estate to be subject to Inheritance Tax. Currently it's levied on everything you leave over £312,000 (2008/2009). See for yourself what it includes:
• your investments and savings
• your home and car
• your furniture and personal effects
• the proceeds of your life insurance, unless it is written in trust.
The rates of Inheritance Tax are 0% and 40% for everyone. This is equivalent to the highest current rate for income tax. The tax is paid by the estate - and is deducted from the estate on death - so Inheritance Tax is relevant whether you stand to gain an inheritance or you plan to leave one.
Inheritance Tax is the tax that is paid on your 'estate'. Broadly speaking this is everything you own at the time of your death, less what you owe. It's also sometimes payable on assets you may have given away during your lifetime. Assets include things like property, possessions, money and investments. Inheritance tax may also be payable on certain lifetime gifts.
Valuing the estate for Inheritance Tax purposesIf you have been nominated as someone's personal representative you have to value all of the assets that the deceased person owned. This valuation must accurately reflect what the assets would reasonably fetch in the open market at the date of death.
Application for probate is normally made to the appropriate probate registry (England and Wales), the local Sheriffs Court (Scotland) or the Probate and Matrimonial Office (Northern Ireland). You need to carry out the valuation before applying to take over management of the deceased person's estate (called 'applying for probate' or sometimes 'applying for a grant of representation/ confirmation'). If Inheritance Tax is due on the estate, the probate or grant won't normally be issued until at least some of the tax has been paid.
How Can We Help?We have considerable experience in the design and implementation of IHT mitigation schemes for our clients. Some of these can be complicated but there are also some basic inexpensive steps, which can create immediate benefits in the majority of cases.
Some are only applicable to married couples and civil partners but there are also steps that single people should take. The vital feature is that in mitigating the tax liability, you should not risk your lifestyle by reducing income, access to your capital or, in giving away your property, lose the right to remain living there.
Imperial Independent Financial Advisers Ltd is an appointed representative of Sage Financial Services Ltd, which is authorised and regulated by the Financial Services Authority.
Sage Financial Services Ltd is entered on the FSA register (www.fsa.gov.uk/register) under reference 150452.
The information and content of this website is intended for UK consumers only and is subject to the UK regulatory regime.
The FSA do not regulate some forms of mortgages or tax planning services.
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