Many of us know that when a close relative passes away we may be entitled to some of their estate. For example if a parent should leave their house to the children they all get a share of the proceeds of the sale of the house. However, the tax man also gets a share. This is called Inheritance Tax; it can also be called Estate Tax and Death Duty.
Inheritance Tax is usually defined as a tax on the estate, or total value of the money and property of a person who has died.
The Society of Will Writers has offered advice on limiting inheritance tax (IHT) liability and other information on the issue.
A spokesperson for the group said people can make reductions to IHT liability by "fully utilising" the nil rate band allowance and permitted exemptions.
"Not only through death planning, wills, but also during the lifetime, such as annual exemptions, gifts from income, etc," the representative stated.
While the nil rate band allowance was described as a "small part" of planning for tax, the spokesperson added it has made it simpler for married couples to plan.
The nil band rate is usually defined as the value of an estate that is not subject to inheritance tax in the UK. This means that if the total value of your estate is below a certain threshold value no inheritance tax is payable by the beneficiaries of your estate.
Unmarried couples may also benefit from IHT rules; as tax liability is not paid on property where joint tenancy is held when the home is passed by survivorship to the remaining party after death. Giving property away may also restrict IHT, depending on how long after the gift the former owner survives.
The society's spokesperson concluded by saying consumers should consult a qualified expert regarding IHT.
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