Don't miss out on these tax savings...
Following recent changes in legislation in respect of Inheritance Tax it has meant that it may well be possible for savings to be made on the amount of inheritance tax due on the estate of the deceased.
It is now possible to use up any allowance not used previously on the death of a spouse when calculating tax on the death of the remainder, so long as the second spouse died after the 9th October 2007 any percentage of the then nil rate band unused can be included in your calculations. An example of this is as follows;
George died in January of 2001 and left his total estate valued at £400,000 to his wife Mildred, no tax was due as the transfer to his spouse was exempt from inheritance tax, subsequently Mildred passed away in February 2008 leaving her total estate of £575,000 to her son James. Whilst the current years (2008-2009) exemption is £312,000 James will also be able to claim the unused relief from his late fathers estate, this would mean that a total estate of up to £624,000 would be free of inheritance tax.
Under the old rules tax would have been payable at 40% on £263,000 which would have amounted to £105,200
Because the new rules are worked on a percentage basis it means that whilst the first spouses estate may have been quite small the total unused relief could be available up to £312,000 in the current year. The relief does not need to be claimed until the death of the second spouse, evidence of the first spouses affairs/estate will be expected in order to make the claim so it should be noted that it may well be prudent to ensure the necessary documentation is together.
As with all reliefs there are exemptions to consider for instance;
It only applies to Spouses/Civil Partners and does not include children or couples co-habitating
If the couple divorce then the relief is automatically lost, this is without time limit
On the plus side you can use up unused allowances from previous marriages if you decide to re-marry, whilst there is not a limit to how many marriages there is a limit to the amount not exceeding 100% of the unused nil rate band allowance.
If
you have currently made no IHT provision, and you are single, a
widow or a widower, these could be the bills your beneficiaries will
have to face on your death. Fortunately there are ways to keep the
Inland Revenue's slice of your assets to a minimum or, with
careful planning, to nothing at all.
If
you think that you could have a potential IHT liability, the first
step is to talk to us and we can introduce you to someone who can help, you are probably far wealthier than you
imagine. Remember, an estate worth just £700,000, which could
include your family home, a second property, life assurance policies
not written in trust and other investments you hold, could generate
an IHT bill of £30,400.
Here
are some of the ways in which we can help you plan for IHT.
Making
a will Proper wills are
the cornerstone of inheritance tax planning, yet far too many people
die without having made one. If you don't have a will, you cannot
guarantee how your assets will be distributed on your death.
Making
lifetime gifts If
you potentially face a large inheritance tax bill, you can give
assets to a relative or other party with no immediate tax liability.
Known as potentially exempt transfers (PETs), these gifts are
subject to a relatively complex seven-year rule. Say you give away
assets worth £40,000. If you live for another seven years, that £40,000 will not be taken into account when your estate is valued
for IHT purposes. If you die within seven years, a sliding scale of
tax is due if the PET causes you to exceed your allowable nil-rate
band.
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