Inheritance Tax

If the value of an individual’s Estate on death is above the threshold announced each year in the Budget (for 2004/05 - £263,000) Inheritance Tax is payable. It is payable only on the amount over the threshold and at a single flat rate (current 40%). The Estate is made up of

• Gifts made within 7 years of the death and not covered by an exemption
• The total value of everything owned by the deceased less bills and mortgages owing at the date of death and funeral expenses
• the deceased’s share of assets owned jointly with anyone else less the deceased’s share of joint bills and mortgages owing at the date of death
• the capital value of Trust Funds from which the deceased benefited, for example if there was income as a liferent or the right to live in a house

Sometimes property that the deceased gave away is still treated as part of the Estate for Inheritance Tax, for example if the deceased gave a house to someone but continued to live in it.

There are exemptions from Inheritance Tax – the most important being those for assets left either to a surviving spouse or to Charities.

There are also relief that reduces the value of property for Inheritance Tax, for example business assets and farm land.

IHT planning is an involved and often complicated business with a number of potential solutions appropriate to different circumstances.

Baird & Company have several solicitors experienced in dealing with Inheritance Tax related issues and can assist in delivering bespoke solutions to mitigate Inheritance Tax on death. This may include setting up a Trust either during life time or on death or in working together with independent Financial Advisors in respect to investment or insurance products.