DEATH DUTY – UK INHERITANCE TAX – AVOIDANCE

Many people think that all they need to do to ensure their assets go to their chosen recipients after they die is to make a will. While this is true to a certain extent, if their assets are worth more than the current tax threshold, there will be an amount of death duty (inheritance tax) currently rated at 40% to be paid to the exchequer. It is however possible to plan for death duty and to reduce the amount that may be payable by taking advice on legal tax avoidance. Our solicitors can provide the information you need and may be able to ensure that you can avoid inheritance tax altogether in a perfectly legal way.

Inheritance tax is not payable between married couples and a surviving spouse will inherit the entire estate with no death duty to pay. In addition the law has recently changed to allow both spouses tax threshold allowance to be added together in consideration of bequests made upon the death of the survivor.

One very common method of saving on death duty is to make lifetime cash gifts to potential beneficiaries instead of doing it in a will. There is no longer any tax payable on gifts the only stipulation being that you must survive for a minimum of seven years after making each gift failing which inheritance tax is payable on the amount of the gift if the testators estate exceeds the threshold value.

In essence you are not taxed on gifting an amount of money to someone else; but that amount will become part of your total estate if you should die within that seven year period. In short, if you are planning to bequeath all your worldly assets and be as generous as possible to everyone you know in your last few moments on earth, it’s best to forget it and do it much sooner – otherwise the taxman will be eagerly awaiting their own share of 40% of whatever becomes liable for death duty.

There are other allowances that can be made use of to reduce the amount of death duty. You can make a regular gift below a certain amount to someone every single year that would not be liable for Inheritance Tax should the worst happen. Cash gifts donated to newlyweds from each set of parents and their parents in turn are also exempt from Inheritance Tax, and since both halves of the couple can take advantage of this it is a good way to make sure that a fair chunk of Inheritance Tax can be legally avoided.

It is also possible to vary a deceased’s will within two years of death with a view to tax efficiency provided all beneficiaries agree and the name for this strategy is called a deed of variation.

Our solicitors deal with inheritance tax planning, probate, grants of letters of administration and with contested wills and probate in cases where the validity of a document is questioned, a will is lost or where someone not included as a beneficiary makes a claim. If you would like free initial legal advice either use the helpline or complete the form and a solicitor will discuss your case with you and give you free, no obligation advice. If we take your case on we use the no win no fee scheme.