Why you should be thinking about inheritance tax
As more estates fall into the realms of paying inheritance tax (IHT), how can you maximise what you leave for those you hold close?
Why the increase?
With frozen 'nil rate' allowances, soaring house values mean more estates are faced with an inheritance tax bill before beneficiaries can receive their inheritance from their loved one.
What are the allowances?
Currently, each estate has a 'nil rate band' of £325,000. This means the first £325,000 worth of cash and assets can pass to beneficiaries free of IHT. Care should be taken though, as any gifts made in the deceased’s lifetime could eat up some or all of that band. This would leave more of your estate exposed to IHT at a rate of 40%.
There is an additional allowance, known as the 'residential nil rate band', which currently sits at £175,000. This is available in cases where a person’s main residence is passed to their children or grandchildren.
If you are a widow or widower, your estate may benefit from further relief if your spouse’s estate didn’t use all their available nil rate bands. The maximum total nil rate bands your estate can have is therefore £1 million.
Why should I consider inheritance tax planning?
Depending on how your will is written, someone dear to you may not be able to properly enjoy what you’ve decided to leave them as instead it may be used to pay IHT.
There are many ways that IHT can be mitigated with planning and consideration. Your main priority will be making sure that your wishes are properly reflected in your will. But you may also want to make sure that your loved ones aren’t left with the headache of an unexpectedly large inheritance tax bill to pay.
We can help make sure your wishes for your loved ones can be properly carried out. Get in touch with your usual Larking Gowen contact, who will be happy to help. Call 0330 024 0888 or email firstname.lastname@example.org.
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