Inheritance planning is incredibly important to ensure your assets – your property, possessions and money – are shared out how you would like amongst your loved ones when you pass away.
Writing a Will should be included in your inheritance planning; it enables you to specify how your earthly possessions should be distributed upon your death. At this stage of inheritance planning, you should also name an executor responsible for dealing with your estate and paying your inheritance tax.
Inheritance tax is a tax on the deceased’s estate, their total assets, including cash, investments, property, cars, etc. How much is paid depends on the value of their estate. If it is below £325,000, or you leave everything to your spouse or partner, it’s unlikely they will have to pay any tax. However, if neither applies, your estate will be taxed at 40% on anything above the threshold.
You can’t get out of paying inheritance tax, but inheritance planning can help you reduce the likelihood of the thresholds being exceeded, to maximise the amount your loved ones receive.
One way to reduce the value of your estate is to give gifts to your loved ones; cash, a possession or even property can all be considered a gift, and are not subject to inheritance tax (unless they exceed the threshold limits). You can distribute gifts up to the value of £3,000 in the UK each year, with gifts to charities, your spouse or partner potentially exempt from Capital Gain Tax (a tax on an item when you sell it on).
But inheritance and the concept of inheritance tax can be tricky. Inheritance planning and understanding inheritance tax and all the different allowances and rules can ensure that your loved ones receive the maximum amount of inheritance.
Start inheritance planning early; writing a Will and funeral plan can also help you plan for what should happen after your death. Contact us now or call 0800 411 8683 and one of our friendly advisors will be happy to guide you through the process.