Inheritance tax is a tax that, if due, is payable upon a person’s death. Whether it needs to be paid depends on how much the deceased person’s estate is worth, and who is inheriting.
When does inheritance tax need to be paid?
If the total value of an estate is over £325,000 (nil rate band), then inheritance tax will need to be paid. It is charged at 40% on any amount over £325,000.
What is included in a person’s estate?
An estate includes all of the assets which the deceased owned or was entitled to on the day they died. This can include things like property, money, shares, investments, pensions, and possessions.
How can you reduce inheritance tax?
There are exceptions which can help to reduce inheritance tax. For example:
Spouses and civil partners are exempt beneficiaries. So inheritance tax does not need to be paid, regardless of how much an estate is worth.
Where at least 10% of an estate is left to charity, inheritance tax can be paid at a reduced rate of 36%. Where the whole estate is left to a charity, inheritance tax does not need to be paid at all.
Transferable nil rate band
Everyone is entitled to a nil rate band for inheritance tax. Assets that pass from one spouse or civil partner to another are exempt from inheritance tax. So, if someone dies and leaves everything to their spouse or civil partner, they won’t use any part of their allowance. This can be transferred to the second person’s estate leaving a nil rate band of up to £650,000 when they die.
Residence nil rate band
This is available in addition to the inheritance tax nil rate band. It is possible when a home is passed on death to a direct descendant. In 2018-19, if a property is left to children or grandchildren a residence nil rate band of £125,000 can be added to the original nil rate band. So the total threshold will increase to £450,000.
Transferable residence nil rate band
The residence nil rate band can also be transferred between spouses and civil partners. This only applies if the deceased had a spouse or civil partner who died before 6 April 2017, or if they died after this date but did not use all their available residence nil rate band.
Inheritance tax comes out of the estate funds. It is payable by the person who is dealing with the estate (the executor or administrator), and they can be held responsible for any errors in payment.
Find out about our Inheritance Tax Planning service on our website here: https://www.legalmatters.co.uk/inheritance-tax-planning.php. Call us on 01243 216900 or email us at firstname.lastname@example.org.
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“I’d like to say a big thank you to yourself and your firm for all your help and support over the last few months!! It’s much appreciated. Thank you.” Darren & family
Thank you too, Darren. We’re glad that everything is now settled. Good advice in a supportive and caring manner is what we like to give.
There may be times in your life when you’re unable to manage your own personal affairs. Sickness, injury, old age and short-term incapacity can leave you unable to make decisions about your wellbeing.
While a daunting thought, in advance of these circumstances, you can grant legal authority to someone you trust to make a decision on your behalf.
This is done by completing a Lasting Power of Attorney (LPA) and it legally authorises a designated individual or individuals to take care of your personal matters for you.
Two types of LPA
You can apply for a Health and Welfare LPA or a Property and Financial Affairs LPA. Often, both are applied for together, allowing the attorney to make a decision in both areas and protect the overall wellbeing of their friend or family member.
The Health and Welfare LPA covers matters around your physical care and welfare. Your attorney may be required to make important decisions about any medical treatment you are given, your housing, your general care, and also whereabouts you are cared for. So it’s essential that you select a person you trust, and who will advocate for you when they are required to speak on your behalf.
When it comes to the Property and Financial Affairs LPA, the purpose of this agreement is to make a decision on your financial wellbeing and manage your finances day to day. This could include being responsible for your home, any financial assets, as well as your bank account and savings. It’s important to select someone who will manage your financial affairs soundly.
How to choose your Attorney?
Becoming an Attorney is a big responsibility, and it’s essential to choose someone that you trust. Whether Financial, Welfare or both, you need to be assured that they will behave with integrity, advocate for you when you are unable to, and make often difficult decisions that are in line with your values and instructions (which you can set out in your LPA). It’s worth noting that you can choose more than one Attorney and prepare a stand-in in the event that your original choice is unable to or fails to act.
What is a Certificate Provider?
A Certificate Provider is required to counter-sign your LPA. This protects potentially vulnerable people from being coerced into designating Power of Attorney to someone against their will. Typically, friends, neighbours or the medical community can provide this role. However, they are required to have known you for a minimum of two years.
How do I complete the paperwork?
It’s always smart to consult with a lawyer before you begin your LPA process. A lawyer will also ensure that your paperwork is registered with the Office of Public Guardian (OPG).
To find out more, why not download our “Free Guide to Lasting Powers of Attorney” or talk to one of our experts to learn how we can help you to create and register either or both kinds of LPA. Call us on 01243 216900 or email us at email@example.com.
There are many reasons for having your Will drawn up by a Solicitor. Here are 5 of our top reasons.
- Top of our list, making your Will is one of the most important things you’ll ever do.
Without a Will, how will you get to say who inherits your assets? For instance, without a Will, and where there are no known heirs, your estate will be passed to the Government. This could include property, money and personal possessions. Where there are relatives, under the UK’s inheritance laws (Rules of Intestacy), people who are blood relatives could be entitled to a share of your estate. Even distant relations could be in for a windfall. And partners may not recognised if you were not married or in a civil partnership. Neither are stepchildren.
- The need for clarity
So you’ve sensibly decided to draw up your Will. But if you’re thinking of creating a handwritten Will, then think very carefully about it. There are various legal requirements for a handwritten Will (also known as a ‘holograph’ Will).
For instance, it must be signed by the Testator (the person making the Will) in the presence of two witnesses. These witnesses must also sign the Will in the presence of the Testator. Furthermore, the Testator must understand that in doing this, they are creating a Will. So it needs to be a clear and final expression of intention about where assets should go upon your death.
That’s not always as easy as it sounds…
- Mind your language
For the Will to be legal, the correct language and terminology needs to be used. What might seem obvious to you might not be evident in the eyes of the law. And if you do it yourself, you’ll not know that until it’s too late, when the Will gets read, after your death.
Which leads us on to…
- Avoiding Disputed Wills
You don’t want your Will to be disputed after you die. But there are some common instances that lead to a Will being challenged:
- Changing family structures which often include unmarried couples living together and second families
- An ageing population and the increased risk of mental health and dementia
- Rising property values resulting in a growing number of estates worth contesting
- An increase in the number of people leaving money to charities.
A Will can be overruled following a challenge. Whether it is or it is not overturned, such disagreements about inheritance are usually devastating for those left behind, and often very expensive to resolve.
A carefully drafted Will would avoid this heartache…
- And finally, that most hated penalty, Inheritance tax
When you make a Will you’ll want to make sure that your beneficiaries don’t pay any more Inheritance Tax than they have to.
There are many ways to limit your liability, but unless you are an expert in this area, your beneficiaries could end up paying the taxman far more than is necessary.
Advice on how to distribute your assets in your Will can make the most of allowances and protect any vulnerable beneficiaries…
Talk to us about your Will. We are experts and can help you through the process. Call us on 01243 216900 or email us at firstname.lastname@example.org.
When a person dies, if they owned property in their sole name this will need to be transferred to a beneficiary or sold as part of Probate. Here are some things to consider if the home needs to be sold.
Applying for a Grant of Probate
Probate is the legal process for dealing with the distribution of a person’s estate after they have died. To start the Probate process, a Grant of Representation is required. The sale of the property cannot be completed until the Grant of Probate has been issued.
Getting the property valued
It is essential to obtain a proper valuation of the property; backdated to the date of death. To ensure an accurate figure, it is a good idea to get more than one valuation.
Get the contents valued
As well as the value of the property you should also consider its contents. This will need to be valued as part of the deceased’s Estate. You should also locate and secure any valuable items in the house (e.g. jewellery, share certificates etc.).
Protecting the property
One of the first things you should do is make sure that the home is secure. Particularly if it is empty. Check that it is safely locked up, and switch off the appliances and water. You should also remove valuable items that might be at risk of theft.
Make sure the home is insured
Under some insurance policies, a home is not insured if it is left sitting empty for a certain period. Likewise, the death of the policyholder could terminate the policy. Contact the home insurance provider to inform them of the situation and find out what you should do next.
Locate the Deeds
If the property was owned for several decades, the Title might not have been registered at HM Land Registry. In such situations, you’ll need the Deeds to prove ownership.
Let the relevant organisations know
As well as the insurance provider, you should also contact anyone else involved in the property. For example, the local council and utility providers.
Instruct an estate agent and conveyancing solicitor
You can put the home on the market while you’re awaiting the Grant of Probate. But be aware that it can take 3-6 months for a Grant of Probate to be issued (even longer in more complex estates).
Prepare the home for viewings
It is always a good idea to give a home a thorough appraisal before letting viewers in. Where appropriate, consider what needs tidying, fixing etc. to showcase the property at its best.
To help you through the Probate process, speak to one of our expert team speak at legalmatters. Call us on 01243 216900 or email us at email@example.com. We can take over the responsibility for you and make sure everything is carried out in line with the law, and the wishes of the deceased.