What you need to know. Fosters Solicitors answer questions from Let’s Talk readers
What is Inheritance Tax?
Inheritance Tax (IHT) is a tax that is usually payable on death. The rate of tax payable is 40 per cent on all assets above your Nil Rate Band.
What is the Nil Rate Band?
The Nil Rate Band is each individual’s IHT free allowance. This is currently set at £325,000. If the value of your assets does not exceed £325,000 there will be no IHT payable on your death.
Who pays the Inheritance Tax which is due?
Any IHT due is paid from the deceased’s estate. Unless your Will states otherwise IHT is paid from your residuary estate, ie the remainder of your estate after any specific gifts or legacies have been paid. This can be altered by the terms of your Will, ie the Will could specify that individual legacies should bear their own proportion of the IHT liability of the entire estate. It is your Executor’s responsibility to ensure that any IHT is paid.
What happens if I leave everything to my spouse/civil partner?
A gift to a spouse or civil partner is exempt from IHT. If you leave everything to your spouse or civil partner your personal Nil Rate Band remains unused. On the death of your spouse or civil partner an application can then be made to have your Nil Rate Band added to theirs. This means that your spouse or civil partner can leave two Nil Rate Band’s worth of assets without incurring any IHT liability. At the current rate this would be £650,000.
Can I do anything to reduce the amount of Inheritance Tax payable on my death?
There are certain lifetime actions which can be taken to reduce the amount of IHT payable. If your assets exceed your personal Nil Rate Band we would advise you to seek specialist legal advice from a solicitor trained in this area of law.
Fosters has an experienced and professional team who will be able to advise you on all aspects of Inheritance Tax planning and who can suggest ways to reduce your potential IHT liability.
Send your legal questions to: Let’s Talk Help and Advice, Fosters Solicitors, Wills, Trusts & Probate Dept, 19 Bank Plain, Norwich NR2 4FS or email firstname.lastname@example.org