Inheritance tax (IHT) is one of the most despised taxes ever imposed. We all pay income tax when we earn money and value added tax when we spend what is left. Then, if at the end of our lives we have managed by a combination of ability, frugality and good fortune to have what the government considers too much left, a further 40% of everything over an arbitrary threshold is taken by the same people that already took more than we felt we could reasonably afford in the first place! Then, when what is left goes to the next generation, if those beneficiaries are also in the inheritance bracket, your money is going to be taxed at 40% again as part of their estate.
Of course, we do have the Transferable Threshold. This is the ability to transfer any unused portion of an individual’s personal IHT allowance to a surviving spouse (the term spouse as used here includes civil partners). When a person dies any unused part of their personal IHT exemption or threshold – often called the ‘Nil Rate Band’ or just ‘NRB’ – may be added to the personal threshold of the surviving spouse. No IHT is payable on any assets which pass to a surviving spouse regardless of their value.
However, please note HMRC’s use of the phrase “valid claim”. To transfer the threshold a claim must be made at second death which the Revenue agree to accept as being valid. As this may be many years later there is a danger of things going pear-shaped if it cannot be shown what happened at first death as it can then not be shown what proportion, if any, of the Nil Rate Band of the first to die was unused. If the surviving spouse dies 15 years later, Executors will need details going back at least 22 years.
We also now have the Residential Nil Rate Band which, potentially, offers further relief from IHT. This is not straightforward at all. The legislation is complex and many will not benefit the way they think they will. There really are many ways in which this additional threshold can be lost or reduced. We have information that will demonstrate that and we shall be pleased to share it with you upon request.
But all is not lost. While it is not possible to change the law, and inheritance tax is unlikely to go away, there are some things that can be done that can potentially save a considerable sum of money. We shall be happy to discuss how you can use a Will to prevent your estate being taxed over more than generation while not tying up any assets during your lifetime.
This solution is effective and not expensive. We shall be pleased to explain how it works and how you may take advantage of it.