Inheritance Tax Planning
Why should I make a Will?
Making a Will is essential if you want to control where your money goes when you die. If you don’t make a Will the Law, not you, decides how your Estate is distributed. This may not reflect your wishes. The laws of intestacy mean that your Estate will not automatically pass to your spouse, and a common law spouse may get nothing at all.
What can I pass on to beneficiaries free of Inheritance Tax?
For the tax year 2007/2008, Inheritance Tax is not payable between husband & wife.
However, other beneficiaries (such as your relatives) may be liable to this tax if the total estate is over £300,000 (tax year 2007/2008). This figure is known as the "nil rate band".
What rate of tax is Inheritance Tax charged at?
Inheritance Tax is payable at 40% on that part of your estate above £300,000 (tax year 2007/2008).
Levels and bases of and reliefs from taxation are subject to change and their value depends on the individual circumstances of the investor.
How do I use a Will to help with Inheritance Tax?
Many married couples are quite unaware of the potential tax bill they leave to their family on the death of the second partner.
If you are married, and you and your spouse have made wills leaving everything to each other, all assets will pass to the survivor free of Inheritance Tax. This is thanks to the "spouse to spouse exemption" rule which is available to all married couples.
Although this achieves the desired effect, it has a marked disadvantage from an Inheritance Tax view, because the liability to Inheritance Tax is compounded so that on the subsequent death of the survivor, Inheritance Tax will be payable on your combined joint estate.
Unfortunately this means that tax at 40% is payable on the value of the estate in excess of £300,000 (tax year 2007/2008).
Please contact us to assist with planning. We will recommend that you seek Legal Advice in connection with putting together a Will.
The Financial Services Authority does not regulate taxation and trust advice and Will writing.
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