It is estimated that 70% of people have not made a Will, inadvertently putting their families at financial risk. It is a common assumption that if you die intestate, without a Will, then your Estate will automatically transfer to your loved ones. However, this is not the legal position. Part or all of your Estate could end up with the Crown or even HMRC. No one likes to think about what happens on death but simple tax planning now will ensure that your Estate is distributed according to your wishes and the inheritance tax payable by your family may be mitigated.
The first step to consider in Estate planning is to evaluate your assets and liabilities. The drawing up of a simple personal Balance Sheet will help. Many people mistakenly believe that their Estate won't be liable for Inheritance Tax, and fail to make adequate provisions including a professionally drafted Will. Did you know that the value of your home, your personal belongings, overseas property, sums due from life policies, savings, beneficial interests in trust, stocks, and shares will all be taken into account when assessing the value of your Estate? A common mistake that people make is to believe that their Estate is comprised only of tangible lifetime assets. No account is taken of how an Estate can significantly increase on death as a result of sums that are paid out to the Estate under life policies. Some people do not realise that any gift made, that exceeds your annual exemption, in the 7 years prior to you death is potentially liable for Inheritance Tax.
For 2011-12 the current rate of Inheritance Tax is 0% for the first £325,000 of your estate, (the 'nil rate band') and 40% on any amount thereafter. Any Inheritance Tax due must be paid usually within 6 months of a person's death, so an unexpected bill from HMRC can put your loved ones under severe financial pressure at an already difficult time.
The idea of lifetime estate planning and Inheritance Tax can be a daunting prospect. You could therefore benefit from a free consultation with Attwells' Solicitors Private Client Department who believe that it is only ethical that client's should not be charged for understanding their legal position and the options available to them.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.