Inheritance Tax

Rules on Inheritance Tax allow a spouse (including those already widowed before the 2007 rule changes) or registered civil partner to benefit from both their own and their deceased partner's unused tax allowances - that's £325,000 each, making a possible combined tax free estate value of £650,000 where the partners pass their estate to each other (the 'spousal exemption').

Now that figure may well mean that many people's estates are safe from the threat of Inheritance Tax, however it is always worth checking carefully that increased property prices, or the value of perhaps an employer's Death in Service benefit payment, or maybe an expected inheritance won't propel your estate into Inheritance tax territory. One of the first things we cover in a consultation with a client is an estate valuation looking at all these possible factors. Once we've eliminated the need for protection against Inheritance Tax we can look at other areas of concern such as Long Term Care, and cater for those as before.

The £325,000 level (or Nil Rate Band to use the technical term) has been frozen until 2015, meaning that in real terms the allowance has been reduced. That means more people will find themselves in an Inheritance Tax situation.

So the unpleasant fact - any amount over and above the allowance is liable to Inheritance Tax at a whopping 40%.

• For a single person with an estate of £500,00 that's £70,000 in tax on death.
• For a married couple or registered civil partners with an estate of £1m that's £140,000 in tax on 2nd death.
• Unmarried couples count as single people - taxed on both deaths.  That could mean up to £242,000 in tax on a joint £1m estate.

But, we can still do something about this with a range of specialised will trusts to cater for the family situation and future needs. It could be with an Unmarried Couple's Inheritance Tax Will, a Revocable Life Interest Trust, a Business Trust, a Death in Service Benefit Trust, or a combination of one or more - there are these and other solutions and we'll identify exactly the right one for you. And what's more, still very affordably.  A small cost to drastically reduce, or in many cases eliminate totally the risk of your family writing that size of cheque to the tax man. 

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