Some people say if you make a will you can make sure that no inheritance tax will be charged on your estate, as if a blanket rule applies. In actual fact some estates won t involve inheritance tax as they are under the allowance. Others may be less straightforward and we d always advise you to consult a professional before attempting to sort things out for yourself.
If inheritance tax is due, your executors would have six months, from the end of the month in which you die, to settle the amount. After this time interest will be charged. Inheritance tax on certain assets, such as buildings and land, may be deferred, but will still be payable eventually.
There are some gifts which are free of inheritance tax whether they re given during your lifetime or at the time of your death. These are gifts which you make to UK charities or to your spouse or a civil partner. If you re separated but not divorced (or the civil partnership has not been dissolved) then you re still free to make the gift. This applies as long as you both live permanently in the United Kingdom. This also applies to donations of political parties in the UK and various national institutions such as universities, the National Trust and national museums.
It may seem an obvious way of avoiding inheritance tax by passing your home on to someone else, whilst still living there. This is not possible, however, and inheritance tax would be charged on the full value of the gift . An additional complication in some cases could be that the person making the gift could be charged income tax on the value of the gift which they have retained. If this happens they can make the choice of treating it as a gift with reservation.
There are some situations where a potentially exempt transfer fee may be applied. These are gifts that a not liable to inheritance tax as long as you survive for seven years after the gift is made. These include gifts to friends or relatives or various trusts, such as one made for someone who is suffering from a disability. You need to talk to an advisor on this one, as there is a scale where the actual benefit of the gift is adjusted. For example if you die very soon after making the gift, inheritance tax will be due on virtually all of it, but should you die later in the seven year term, then less tax will be charged. These transfers are commonly referred to as PETS.
Of course, if you don t make a will at all, or make one which proves invalid, then the Revenue will effectively step in and decide everything for you. Strict laws of intestacy will apply and the people that you d really want to pass your home and valued possessions to could be left out in the cold. A properly drafted will avoids any confusion. So don t take the risk make a will and make sure that your next of kin know where to find it!
Author Resource:
How do you write a will? Visit Brokers Online ( http://www.life-assurance-bureau.co.uk/wills ) to find information on Last Will and Testaments, Wills and Trusts, Free Wills. Brokers Online is a financial web site offering Life Insurance ( http://www.life-assurance-bureau.co.uk ) and other insurances.
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