This month, we answer one of the most commonly asked lifestyle questions: when will my family receive my inheritance, and when will they have to pay tax?
In short, it all depends on your individual circumstances. Are you leaving a Will? Will it be challenged after your death? Are your assets tied up in property and other non-liquid possessions? Most cases follow the same process, but with the right advice, the complexities of probate can be significantly untangled.
Writing a Will
Whatever the circumstances, the first step is to appoint someone close to you – or a professional probate expert – to deal with your property, money, and possessions – known as your “estate”.
If you haven’t already, you should make writing a Will a matter of priority. The difference between having a Will and not having one can add months, even years to the time it takes to pass down your estate. Furthermore, owning a watertight Will could save your family thousands of pounds in Inheritance Tax.
Paying Inheritance Tax
Before the estate is distributed, the executor will need to pay any Inheritance Tax that is due. There’s normally tax to pay if the value of your estate is above the £325,000 threshold, except when it is left to your spouse or civil partner or a charity.
If you give away your home to your children (including adopted, foster, or stepchildren) or grandchildren, your threshold will increase to £425,000.
Any unused threshold can be transferred to a spouse or civil partner, meaning the maximum available allowance (as of April 2017) is £850,000.
Inheritance Tax is charged at 40 per cent on the part of your estate that is above the threshold. The executor can pay the tax using his or her own funds and claim it back using your assets, or use the available funds from your estate. Click this link for more information on paying Inheritance Tax.
You must pay Inheritance Tax by the end of the sixth month after the person died, as interest is charged on tax owed after this date.
It can take as little as three months to receive inheritance after probate has been granted, but it will normally take around six to nine months – and more if the estate is disputed. Likewise, HM Revenue & Customs (HMRC) must be happy that Inheritance Tax is paid in full. This can be sped up if all essential financial documents are in place.
Too much to take in?
We’ll be happy to answer any questions you might have about Inheritance Tax.
As a firm that specialises in Inheritance Tax planning, our goal is to ensure that you will be passing down the financial security that your family deserves.
What we can do for you:
- Inheritance tax planning
- Capital gains tax implications
- Will planning and referral
- Income provision in retirement
- Business exit strategy and succession planning
- Asset protection
Remember, it’s never too early to plan for your future. Contact JW Hinks for more information today.