Inheritance tax (IHT), if not properly guided and supported financially, can cause families to lose thousands of pounds. There are many ways to avoid inheritance tax, even though they can be difficult to understand initially.
A financial advisor will help you make sound financial decisions and avoid tax. You can also search online to get the best inheritance tax advice from experts via inheritance-tax.co.uk/area/inheritance-tax/.
Inheritance tax is a tax that is added to the estate of a person who has died. This tax applies to all property, money, and possessions. The executors must determine the value of all assets, and subtract any liabilities (debts) after death. Your "estate" is the amount that is subject to inheritance tax.
What assets are in your estate?
For inheritance tax purposes, any asset of value should be included in an estate. If the asset is jointly held, your share will be included in your estate.
This includes property, bank accounts, and investments, shares, ISA, investments, shares. The date of death determines the asset value.
What assets do you not have?
Some assets are not included in your estate and therefore are exempt from inheritance tax. This applies to most types of pension plans, trusts, and life insurance.
If someone dies, all outstanding debts will be paid out of their assets. This will decrease the estate's value for inheritance tax.
For IHT purposes, funeral expenses can generally be deducted from an estate.
What is the 7-year rule for Inheritance tax?
If you die within 3 years of giving a gift, the entire value of the gift will be added to your estate for inheritance tax.
Inheritance tax will be applied to gifts that are made after you have died for more than three years but not within seven years.