Planning your finances in advance should help you ensure that when you die, everything you own goes where you want it to. Making a Will is the first step in ensuring that your estate is shared out exactly as you want it to be.
When someone living abroad dies, the rules for paying Inheritance Tax usually depend on:
Reducing an Inheritance Tax – it’s good to give
A n estate can pay Inheritance Tax at a reduced rate of 36% on some assets (instead of 40%) if 10% or more of the ‘net value’ of their estate is left to charity.
Assets that pass on free of Inheritance Tax
Inheritance Tax reliefs allow some assets to be passed on free of IHT or with a reduced bill.
HM Revenue & Customs allows you to make a number of small gifts each year without creating an Inheritance Tax liability. Remember, each person has their own allowance, so the amount can be doubled if each spouse or registered civil partner uses their allowances. You can also make larger gifts, but these are known as ‘Potentially Exempt Transfers’ (PETs), and you could have to pay IHT on their value if you die within seven years of making them.
Usually the ‘executor’ of the Will or the ‘administrator’ of the estate pays Inheritance Tax using funds from the estate.
With careful planning and professional financial advice, it is possible to take preventative action to either reduce your beneficiaries’ potential Inheritance Tax bill or mitigate it out altogether.
Inheritance Tax matters
Inheritance Tax was introduced in the UK in 1796 and stemmed from the influence of the French Revolution. The concept of IHT was supposed to protect poorer members of society and interrupt the legacy of inherited wealth.
P ension Wise, the government’s guidance guarantee service, must discuss life expectancy as part of people’s retirement planning, according to a recent Aviva report.
The British population is determined to get more savvy about their saving and spending habits in 2015, with three quarters (76%) of adults admitting they are prepared to moderate their lifestyle, according to a new survey by Standard Life.