Understanding what will happen to your money when you have died, is something that we all need to think about. As is often said: you can’t take it with you when you are gone. Unfortunately – dying and taxes remain the two things you can really expect, so for that reason alone, now is the time to think about how you or your children may be affected.
For many of us, inheritance tax is bit of a mystery and understandably so – it is perhaps something we would rather not think about. But getting your finances in order whilst you are fit and healthy will be the best thing you can do for your family in the event of your death.
Why do we have Inheritance Tax?
Inheritance Tax is never going to be popular – most of us feel that we have spent our lives working hard and being taxed and therefore should be able to leave our assets and savings to our family without losing any to fund others or the State. However, Inheritance Tax has been around for a long time and doesn’t show any real sign of going away, despite the promise of each Government to change it. Whilst it may have once been justified more easily as the wealthy were an exception, nowadays more and more people have worked and accumulated considerable savings and assets. For now though, Inheritance Tax looks here to stay and as such, the best thing we can all do is ensure we are managing our assets as efficiently as possible.
The details – in brief.
Inheritance Tax was once something that only the really wealthy had to think about. However, nowadays, most families will be liable for Inheritance Tax on some level, due mainly to rising property prices and changing legislation.
When you die, it is usual for most of us to wish to leave our finance and assets to our family members or friends. By arranging your affairs now, you can be sure to pass your money and property on in the most efficient way possible and without losing more than is really necessary.
To date, if your estate is worth more than £325,000 your assets could be eligible for Inheritance Tax. This means that your wealth above this figure could be subject to 40% deduction before being passed on to your children. Married couples can combine their nil rate band to reach a £650,000 threshold but with rising property prices this is often easily breached.
However, changes coming into effect in April 2017 will see a family home allowance introduced which will be added to the existing tax-free allowance. This will mean that those who have no considerable assets other than the family home, will be able to pass the property to their children without fear of a huge cut in inheritance tax or losing their home altogether. Good news? Yes – but your remaining assets could still be eligible and your property can only be left to your direct family.
That’s because it is. Inheritance Tax is a very complex area which most of us would rather not become familiar with.
Disclaimer: The information contained within this article are provided as illustrative purposes only based on legislation at the time of publication. Nothing in this article should be construed as advice or guidance to one’s personal situation. The value of your investments may go up and down, similarly, other aspects of your wider lifestyle and financial context may impact on your objective. In a nutshell, don’t rely on blogs and the articles for personal advice, and always seek advice from a qualified professional.