Consider inheritance tax when making a will
by Sarah Ashcroft
One of the main things to consider when making a will
, after the distribution of assets, is how much tax beneficiaries will pay.
Inheritance tax is currently chargeable at a rate of 40 per cent on all assets worth more than £325,000, so if you have a home and some cash or investments, you could easily be over this threshold.
It therefore makes sense to use all of the available tax relief to ensure that those left behind have to pay as little tax as possible on money or assets left to them in your will.
One of the easiest ways to limit inheritance tax is to transfer the nil-rate band to a spouse so that the tax is not payable until the survivor of a couple dies, meaning that tax is then only payable on the joint assets exceeding £650,000 in value.
A will is a key tool in preventing paying too much inheritance tax as it not only means that assets go to those you want them to, instead of just being split under the rules of intestacy
, it also means some money can be left in trust.
Paying part of your wealth into trust in your will means that not only can a spouse be provided for, but assets can be protected for children and grandchildren.
Similarly, anything that does not need to be considered as part of your estate should be kept out of it for tax reasons. This includes life insurance policies.
New life insurance policies can be put under trust so that any payout goes directly to a person instead of into your estate.
The transfer of assets between spouses and same-sex couples in civil partnerships is mostly tax free, including the family home. One major problem for unmarried couples can be if they jointly own a property, the surviving partner will need to pay inheritance tax just to remain in the house.
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Published on: June 26, 2012
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