Typical Inheritance Tax Questions
The Fry Group provides advice and support to those concerned about the value of their estate and the impact of Inheritance Tax on their heirs. To follow are some recent real-life Inheritance Tax questions which have been posed regarding estate planning:
Q: What is the first thing to consider in Inheritance Tax planning?
A: The first, and main, solution when reducing Inheritance Tax is a valid and properly considered Will. A tax-efficient Will ensures that your assets pass to those you want them to, rather than the UK Government or other beneficiaries.
Q: Can I gift my home to relatives and still live in it?
A: Yes, but you have to survive seven years from the transfer and be able to prove that you have paid a full market rent (for as long as you live there) to continue living in it. This is called a gift with reservation.
Q: Will my overseas assets be exempt from UK Inheritance Tax?
A: No, IHT is calculated on your worldwide assets, with the exception of individual who are domiciled overseas
Q: What is the current UK Inheritance Tax rate?
A: Inheritance Tax is charged at a flat rate of 40%.
Q: Are there any allowances from UK Inheritance Tax?
A: Everyone is entitled to have a certain proportion of their assets pass tax free (the Nil Rate Band). Until 2020/21 this is set at £325,000 per individual. Further allowances come into play where an individual leaves the property in which he has lived to his descendants. See our Inheritance Tax guide for more detail on lifetime allowances and how gifts impact the Nil Rate Band
Q: Can I just not tell the Exchequer that Inheritance Tax has been paid?
A: Probate (the legal right to take control of the assets) will not be granted until at least a proportion of any IHT due has been paid, and a full account has been filed. Filing a false account is a crime, and dealt with accordingly.
Q: How can I reduce my Inheritance Tax liability?
A: There are many options available. Usually the best course of action is a combination of solutions, taking advantage of available exemptions, a properly structured Will and possibly a specific investment to reduce the potential liability.
These are just some of the Inheritance Tax questions that clients are concerned about when estate planning. As with every aspect of financial planning, each individual’s circumstances are unique and require a bespoke solution. The Fry Group has helped hundreds of clients with IHT planning.
If you have Inheritance Tax Questions or wish to discuss your own circumstances in more depth, please contact The Fry Group.