INHERITANCE TAX INFORMATION & REPRESENTATION

How the Inheritance Tax Works ~ Our solicitors have thorough knowledge of the British inheritance tax. With the assistance of an experienced solicitor, you can plan your estate so that your assets are distributed according to your wishes rather than handed over to the tax collector. Inheritance tax is based on the value of your net assets, which can include lifetime gifts made within 7 years of your death.

Valuing Your Estate ~ Before a solicitor can provide you with accurate information about the British inheritance tax, you will need to determine the value of your assets. In order to avoid the IHT, you will first need to calculate your precise total worth. Keep in mind that your total assets are much more than just the money in your bank account and your real property. For instance, you must also include things like company benefits and death in service benefits. It is also important that you have an idea of how you want your assets distributed upon your death.

With that information in hand, a solicitor can help you decide whether it would be financially beneficial for you to make gifts of those assets whilst you are alive. At the present time, there is no gift tax in the UK. There is, however, the very real possibility that an inheritance tax will have to be paid on gifts if you pass away within a set number of years after the gift is made. This law was enacted to prevent individuals from circumventing the IHT by making large death-bed gifts.

Potential Tax on Gifts ~ As explained above, the UK currently has no gift tax in place. However, when gifts are made, there is a potential for an inheritance tax liability to arise in the future, payable upon the death of the gift giver. Such counterintuitive possibilities make the inheritance tax a particularly complicated area of the law. The problem is that if you do not survive for at least 7 years after giving the gift, then that gift will be treated as part of your estate. To avoid the application of the inheritance tax to a gift made during your lifetime, it is best to give your assets away early. Death-bed gifts will not accomplish your goal of tax avoidance. This is the type of advice a solicitor experienced with the inheritance tax can give you.

Decreasing Your Inheritance Tax Liability ~ Our solicitors are knowledgeable about the ways that you can decrease your IHT liability, or possibly avoid it all together. Two methods in particular are quite common. One is the annual gift allowance, and the other is a tax-free marriage gift presented to a bride and groom by their parents and/or grandparents. For married couples, there are several specific issues to keep in mind when planning for taxes. Husbands and wives can take advantage of two nil rate inheritance tax bands in order to save a sizeable amount of taxes. Joint ownership of their home and other real property is another issue for married couples to consider.

Another way to reduce taxes payable after death is to use a deed of variation, sometimes also called a deed of family arrangement. The deed of variation is especially beneficial if all of the assets are passing to a surviving spouse. In those instances, the deed of variation will reduce the amount of inheritance tax the surviving spouse must pay. Surviving spouses have the ability to reallocate those assets in a more tax-efficient manner within the time limit of two years after the death of their spouse.