NAQVI & CO. SOLICITOR PROVIDES LEGAL ADVICE AND SERVICES FROM ITS OFFICE IN SOUTHALL, MIDDLESEX, LONDON
Ordinarily it can be difficult thinking about death, but it is important to think about what will happen to your possessions when you die. If you don’t, the rules of intestacy will make those decisions for you. These are a complex set of rules that dictate which family members can inherit from your estate irrespective of your wish about who do you want your wealth to pass on to. A professionally drafted Will provides you with peace of mind about:
How your property, possessions and savings should be shared out when you die
Who should handle those affairs - your executors
Who will look after your children as guardian
What should be put in Trust for your young or disabled beneficiaries
Who should look after any money that you put in Trust for these beneficiaries etc
Our solicitors will listen to your requirements; give you practical advice as to the best options for your situation and then draft a legally binding Will. They can also give you advice on tax-saving measures to reduce the amount of Inheritance Tax that may need to be paid on your estate.
What is inheritance tax?:-
In simple terms if the value of your estate is over a certain amount when you die, inheritance tax will have to be paid. Your estate includes everything you own – so, your home, other property, savings, investments, possessions and even any debts owed to you.
Your estate will also include the value of any gifts you’ve made to others during the last seven years, meaning you can’t just simply give away all your assets just before you die to avoid inheritance tax. You can however make a number of allowed gifts each year which will not be considered to be part of your estate. A solicitor will be able to advise you on these and how to best use the allowances to suit your circumstances.
The amount of inheritance tax to be paid will depend on the threshold which applies to you. The standard threshold for the 2015/2016 tax year is £325,000, but if you’ve benefited from your late spouse’s estate, then your threshold could be as much as £650,000. Your solicitor will be able to advise you on this in more detail.
Your estate will be taxed at 40% of its total value over the allowed threshold, after any deductions have been made for funeral expenses, debts, transfers to your spouse or exempt gifts (typically to charity or gifts involving businesses or agricultural property).
Reducing your inheritance tax liability
The important thing is that your will reflects your wishes. So once you’ve decided on what it is you’re looking to achieve for your dependants and family, there will usually be opportunities to minimise inheritance tax liability by choosing tax efficient investments, creating trusts or putting other lifetime tax planning arrangements in place..
Inheritance tax and the family home
Your home is likely to be the single most significant and valuable asset in your estate. Being able to remove it as an asset for inheritance tax purposes, yet still continue to live in it. You can consider giving ownership of your home to your children or putting it into a family trust, and then paying rent to live there, but that might be expensive. Another option might be to take an equity release on your home (with specialist advice) and then give the capital away to your children as a gift.
If at the end of the day inheritance tax does need to be paid, because of the value of your home, then that part of the tax can usually be paid in installments over ten years (with interest), hopefully allowing your family to avoid selling the home to pay the tax.
Inheritance Tax principally is tax paid as a result of your death on all your estate: house, savings, car, antiques, household items, life policies, cash lump sums, inheritance from parents etc. The first £325,000 is tax-free. Everything over £325,000 is taxed at a rate of 40%.
For example, on a total estate of say £400,000, there would be a tax bill to be paid of over £30,000 . This is money that you will not be able to leave to anyone except the taxman! What could your children do with this?
The very bottom line is whether you would rather give your hard earned money to the taxman or to your children/grandchildren.
How can you avoid Inheritance Tax?
There are a number of ways to avoid Inheritance Tax. Here are some of the most popular:
Small gifts of money can be given away annually to reduce Inheritance Tax (up to £3,000 per person).
A Discretionary Will Trust uses your Nil Rate Band (currently £325,000). This can take out up to 50% of the value of your house. This can be used for either spouse or partners but sadly not for singles or widows/ers. If your partner has died in the last 2 years, you can do a Deed of Variation and make/change a Will to make it tax efficient (as long as all the beneficiaries agree).
Married couples and civil partners have a special concession. They can also use the left over allowance of their deceased partner effectively doubling the Nil Rate Band from the current £325,000 to £650,000.
For larger estates, say over £650,000, there are a number of new ways to save even more IHT than ever before. We can ensure that your money goes to your children and not to the taxman.
An Inter Spousal Transfer: married couples can in time save up to 50% of the value of your property by effecting a Deed of Gift of the debt created, to the children.
Investment Trust: Gift up to £325,000 in funds to a special type of Relevant Property Trust which then incurs an income producing investment e.g. unit trusts. The income can go to the person who made the gift. After 7 years, the gift can be excluded from IHT.
Lifetime Trust: Gift £325,000 to a Trust every 7 years and repeat every 7 years. Each such gift is outside of the estate after 7 years.
Pilot Trust: There are a number of ways in which trusts can be set up in a person’s life time to save Inheritance Tax for future generations.
Sharing Ownership: You can gift a portion of your home to an "occupant" such as a child, niece, nephew etc. This could eventually fall outside the calculation for IHT.
Life Insurance to pay the Inheritance Tax bill when you die. This covers the IHT liability but unfortunately can be quite expensive and ideally should be used only if the other IHT saving methods do not "mop up" all the tax payable.
If inheritance tax planning is something you believe could be of benefit to your family, you should talk to a solicitor about your situation and options. Naqvi & Co. Solicitor provide a Free First Advice service, so you can call us for a chat to find out more.
Probate administration is the process of implementing the terms of a loved one's Will, including fulfilling any legal and tax obligations.
The process is normally carried out by a named Executor. Our solicitors understand that administering an estate, following the death of a loved one, can be very stressful because of the issues involving:
Estate administration issues
Making decisions on a person’s behalf (power of attorney)
Advice on what to do when someone dies.
The aim of our Solicitors is to support the Executor and remove the burden and stress by:
Applying for Probate
Assisting with the valuation of assets such as the house and other valuables
Making decisions on a person’s behalf (power of attorney)
Notifying and authenticating the beneficiaries
Distributing the estate in accordance with the terms of the Will.