Your inheritance allows you to support your children, siblings and loved ones after you’re gone, and as such it becomes one of the most important financial decisions you will make. However, you should be aware that your inheritance could be subject to inheritance tax and below is a quick guide to understanding what it means for you financially.
Inheritance tax is a one-off payment on the value of your estate after you have died. This includes money, property, and any other assets you own. The tax is calculated and paid from the estate after any inheritance allowance is deducted after death.
After death, the Government will need to know the total value of your assets, and liabilities, which includes any outstanding debt. Your main assets will include:
Any insurance policies not in trust (includes death in service and some older pension schemes) inheritance tax is then calculated and paid from the estate, which is what’s left once debts are subtracted from the assets. Depending on the value of the estate, it may be required to pay inheritance tax.
There are occasions when you don’t have to pay inheritance tax, these are:
In the event of death there are forms that will need to be completed regardless of whether inheritance tax is owed. At The Stan Lee our experts can help you understand which forms need to be filled out that are associated with inheritance tax.
Everyone is subject to inheritance tax but depending on the value of your estate, whether it is above or below £325,000, depends on whether you will have to pay inheritance tax, which is at 40%. Many people look for ways to minimise their taxable estate with one of the best ways being leaving your estate to your spouse or civil partner.
Inheritance tax must be paid within six months of the end of the month in which the person died. If an estate is made up of property, it can be paid in instalments, for example over a 10-year period. This is something to speak to an accountant about to clarify the terms and conditions, as paying off in instalments will incur interest charges.
If you need any help understand inheritance tax or require advice on making sure you pay the right amount, then speak to one of the team here. While there is no way to avoid inheritance tax there are ways that you can reduce the amount, and this is something that we can help and advise you on.
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