Inheritance tax: what is it and what is the threshold? | Personal finance | Finance

“Remember that these rules do not recognize unmarried partners. If you are not married or in a civil partnership, your partner will not receive anything from your estate (which is not jointly owned by them) unless specified in your will.

“You should review your will if your situation has changed: for example, marriage may invalidate a previous will.

“You can help your family by sharing your plans with them – you may even find that they suggest something different.”

Ms Boyle also suggests that people simultaneously put in place a durable power of attorney to ensure that someone they trust can take care of their affairs if they lose capacity.

Take advantage of exemptions

There are several allowances for gifts that are automatically exempt from IHT, according to Ms Boyle.

These include:

  • £3,000 can be donated each year. This allowance can be carried forward from one fiscal year if it is not used.
  • Unlimited small gifts of £250 are also allowed
  • Gifts between spouses or for the maintenance of children, ex-spouses or dependent parents are also exempt.
  • Gifts to people getting married are exempt: up to £5,000 for the person’s child, £2,500 for their grandchild or great-grandchild and £1,000 for anyone else.

Regarding gifts, Mr. Malkiel explained that people can also: “Make outright gifts of any value tax-free, as long as it is at least seven years before your death.

“The rate begins to decline three years after the donation and gradually drops to zero over the following four years.

“But watch out for the pitfalls – for example, you can’t just give up a house and continue to live there. Your loved ones could be stung for the entire 40% tax bill if you do, potentially with other tax charges on top.

Donation to charity

Many people choose to make charitable donations in their will.

Ms Boyle said: ‘While not always considered part of estate planning, these gifts can reduce the rate of inheritance tax on death by 40% to 36% if used correctly.’

Comments are closed.