How you can help your family and dependants now and when you’re not around
When providing for your family and distributing your legacy you can give away as much as you like – but remember that the executors of your Will need to pay any inheritance tax (IHT) due before your assets can pass to your beneficiaries.
Typically, clients have retired when they begin to plan for IHT. For some clients, this may be too late, as this raises the possibility of being taxed on gifts already made as they’re more likely to die within the seven year timeframe for tax-free gifting.
How much is your estate worth?
Married couples and civil partners can pass their estate to their spouse tax-free when they die. You will also need to consider how your estate will be passed to your dependants. If your estate is valued at less than £325,000, there’s normally no IHT to pay. Only the part of your estate above this threshold will be subject to IHT (currently 40%) – but of course, there are reliefs and exceptions.*
You can give away £3,000 as gifts each tax year (6 April to 5 April) without their value being liable to IHT. This is known as your ‘annual exemption’. But if you die within 7 years of your gifting, then gifts above this threshold will be considered part of your estate and may be liable for tax. If the exemption is not used in one tax year, it can be ‘carried forward’ to the next year.
- Do you know what will happen to your estate when you are no longer here to control it?
- What does your estate entail? (E.g. Savings, investments, property)
- Is your estate worth more than £325,000?
*The existing nil-rate band will remain at £325,000 from 2018 to 2019 until the end of 2020 to 2021. Any amount above the nil rate band could be subject to 40% IHT, which could be reduced to 36% subject to a gift of 10% of the estate being left to charity.
Wren Sterling can handle all aspects of inheritance planning, including Will writing through our preferred suppliers. To discuss in more detail, please contact your Wren Sterling adviser.
This information is based on our understanding of current taxation, legislation and HM Revenue & Customs practice, all of which may change without notice. The impact of taxation (and any tax relief) depends on individual circumstances and you should seek professional advice. The Financial Conduct Authority does not regulate taxation & trust advice and will writing.