Inheritance Tax (IHT), may be payable on your assets when you die. This can include:
- Your home
- Savings & investments
- Pictures & other works of art
- Any other properties or land, even if overseas.
There is a threshold before tax is payable. This is known as the Nil Rate Band and is currently £325,000. The threshold applies to everyone, therefore a couple who are married or in a civil partnership both have the Nil Rate Band amount available to offset IHT tax liability.
In addition any part of your estate that is left to your spouse or civil partner will be exempt from IHT. The exception is if your spouse or civil partner is domiciled outside the UK. Then the maximum you can give them before IHT may need to be paid is £325,000. Unmarried partners, no matter how long-standing, have no exemptions available under the IHT rules.
Where your estate is left to someone other than a spouse or civil partner (i.e. to a non-exempt beneficiary), IHT will be payable on the amount that exceeds the Nil Rate Band.
Gifts before you die
You are able to make a number of gifts before you die which are either exempt from IHT or on which IHT can be reduced.
If you want to review the current limits and rules relating to lifetime gifts, please read our guide to inheritance tax rules.
Nobody wants to pay more tax than they have to, so it may be appropriate to plan ahead.
Through regular gifts and planning of how your assets are owned, your estate and therefore your potential IHT liability can be reduced. Trusts can be set up to assist in IHT planning and can also help to ensure assets are controlled by trustees with certain duties. This compares to absolute gifts, where you lose control and the beneficiary decides.
Trusts are therefore an important tool if the beneficiaries are children or you are concerned as to how the gift will be used.
All our advice relating to trusts and IHT planning is individually tailored to your specific circumstances and encompasses all of your assets, rather than just looking at individual elements in isolation. We have extensive experience in dealing with both straightforward and very complex arrangements on behalf of our clients. In some cases we are advising the 3rd generation of families as their assets are distributed to the next generation in the most tax effective and practical way.
To set up an initial meeting to discuss the potential options for you, please contact us.
Our team is recognised as one of the largest and most approachable teams in Kent and we pride ourselves on our practical no-nonsense approach to what sometimes can be a very technical area of law. Our skills are also recognised by the prestigious Society of Trust & Estate Practitioners.