Inheritance tax can be fairly complex and the ability to gain an understanding of how it works can help to ensure that you receive everything that you are entitled to. The amount payable can vary from person to person but through effective planning, there are a variety of ways to ensure that the amount which is paid is at a minimal amount.
What is Inheritance Tax
Also known as IHT is payable on all valuables you own when you die. It can be any property or possessions with value such as jewelry, art works, cars and savings. However, there is an inheritance tax threshold, which currently states that the person's estate must amount to over 325,000 before it will be subjected to inheritance tax.
Who is Liable to Pay IHT
More often than not, the legal personal representative of the person who died will have to. Usually they have six months from the date of death to pay the liability. On the other hand, trustees and any person responsible for the trust, will be liable to pay on trusts (assets including money, land and investments).
However, if it takes more than six months to finalize all the details of the inherited property an estimate can be made and dues can be paid straight away. This means you pay an early payment, so in the future when the exact amount of the property has been settled, you need not to pay the outstanding interest. If it happens that you pay more than the exact amount, then you'll take advantage of the interest from the overpayment.
Exemption from IHT
There are times when your property is more than the declared threshold but it can still be exempt. This includes the following circumstances:
Given to Partner -no liability if you have left to your spouse or partner who is permanently living in UK.
Charities - any gifts given to charities, universities, clubs, museums and the national trust are all exempted.
Annual Exemption - You can normally give away up to 3,000 per year inheritance tax free. This is known as the annual exemption.
Small Gifts - you can offer small presents to as many people as you want amounting to 250 but should not be with the same person who received the 3000 annual exemption.
Wedding Gifts - parents of both couples can give out gifts up to 5,000, anybody can give up to 1,000, grandparents can share up to 2,500 (all of these civil partnership gifs should be given on or before the day of the wedding).
When receiving gifts or bequests from someone, it is essential to recognize the taxes involved. If you are not familiar on how these legalities, it is recommended that you seek professional assistance to help guide you throughout the process.