Inheritance Tax

Life is so precious, and trust you are able to treasure each moment. Planning can help your spouse, children and other dependents.Practical planning considerations include Wills, Trusts, Inheritance Tax and Capital Gains.

Trusts | If you have purchased a home in your individual names, you cannot transfer the home to a trust whilst you have a mortgage. Putting a home in trust will not change the treatment for IHT and/or probate. However putting life insurance in trust will mean funds are immediately available for beneficiaries on the death of the policy holder. Worth noting the bank accounts in joint names of both spouses also make these funds available immediately.

Wills

It is recommended to have a will in each country you have assets. 

Intestacy applies when there's no valid will, or the will doesn't cover the entire estate, the rules of intestacy kick in to determine inheritance. It establishes a set of rules determining how a person's estate (money, property, possessions) is divided, if they die, who inherits and how much. 

The law of intestacy that applies depends on where the deceased was habitually resident at the time of death. For England and Wales: The Intestates' Estates Act 1952 determines the beneficiaries. A will created in another country might be valid in the UK if it meets certain criteria. This is determined through a process called "domicile." If the deceased was considered domiciled (habitually resident) in the UK, their UK will (or the intestacy rules if there's no will) would likely apply.

There is no central depository for Wills. Recommended that your updated wills are distributed to all key stakeholders including executors. 

It's always best to seek legal advice to ensure a will created outside the UK is valid and effective for UK assets.

Here are some resources for further information:

GOV.UK - Intestacy: https://www.gov.uk/inherits-someone-dies-without-will

Which? - Intestacy Rules: https://www.citizensadvice.org.uk/family/death-and-wills/who-can-inherit-if-there-is-no-will-the-rules-of-intestacy/`

Inheritance Tax is a tax on the estate (the property, money and possessions) of someone who’s died.

There’s normally no Inheritance Tax to pay if either:

If you give away your home to your children (including adopted, foster or stepchildren) or grandchildren your threshold can increase to £500,000.

If you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die.


Chargeable Transfer | If you give away more than £325,000 within 7 years of your death, your beneficiaries will be liable to pay IHT.  IHT only comes into play on assets worth more than £325,000, including your property.  IHT will be charged at 40% on gifts given in the three years before your death, with a sliding scale of tax applied on gifts given between the preceding three and seven years.  

Pensions are not usually subject to inheritance tax (IHT) when they are passed on after death.

If you die before the age of 75 and have a defined contribution pension (such as a personal pension or a self-invested personal pension), the remaining funds can usually be passed on tax-free to your beneficiaries.

If you die after the age of 75, the beneficiaries who inherit your pension funds may be subject to income tax on the withdrawals they make from the pension pot, but not inheritance tax.

Life insurance payouts are generally not subject to inheritance tax when paid to a named beneficiary.

If the life insurance policy is written in trust, the proceeds typically fall outside of your estate for inheritance tax purposes. This means they are not considered part of your estate and are not subject to inheritance tax.

However, if the life insurance proceeds are paid directly to your estate rather than to a named beneficiary or a trust, they may be subject to inheritance tax if the total value of your estate exceeds the inheritance tax threshold (also known as the nil-rate band).