Have you maximised the amount of your hard-earned cash you pass on to your heirs?
Inheritance tax is payable when someone transfers ownership of their assets, usually on death. Each individual is entitled to a nil-rate band of £325,000, under which no inheritance tax is payable. Traditionally, few estates exceeded this nil-rate band.
However, the house price boom of recent years has pushed more people into the IHT net. Alongside ISAs, death-in-service benefit, foreign homes or less obvious assets such as paintings or cars, this has boosted the value of an average estate.
The tax rate for all assets over the nil-rate band is 40% so it is possible to build up a large bill quickly. Also, inheritance tax becomes payable relatively soon: it is due six months after the end of the month of death.
This does not give the administrators much time to sell a house or liquidate other assets if that is necessary. With that in mind, if you unexpectedly find your estate now exceeds the taxman’s limits, what can you do?
Although the Government made fundamental changes regarding IHT in the 2006 Budget, there are a number of exemptions allowances available for you. Where possible, you should aim to maximise use of these exemptions and allowances if you wish to pass on as much of your hard-earned cash to your heirs as possible.
The Financial Conduct Authority does not regulate estate planning.