When someone dies and leaves their ‘estate’ behind for disposal there can be an Inheritance Tax (IHT) liability depending on the size of the estate. HMRC call it the ‘threshold’ and for the current tax year (2014) it is set at £325,000. Any value above this threshold will be liable for 40% IHT unless a charitable donation is agreed. In this case liability falls to 36%. Trusts or gifts that have been made during the person’s lifetime can also attract IHT so, as ever, it is a good idea to seek the advice of tax experts at Pros Assist to ensure that no mistakes are made when considering this tax liability.
Normally on the death of a person an executor takes on the responsibility of administering the estate. It can be a family friend or member of the family, or a solicitor. They will ascertain the IHT payment due and deduct that from the deceased’s estate funds. Where assets have been previously transferred into a trust the trustees responsible will make IHT payments where appropriate. In rare cases recipients of gifts from the deceased might be liable for IHT, but this is not a common situation.
Calculating the value of an estate can be a lengthy and complicated business. All the assets should be added together. Property and the deceased’s possessions are the first ones to consider. Additionally, there may be cash reserves and investments that should be added to the pot. Assets jointly owned by other parties or held in trust should not be forgotten. Having gone through all that any outstanding bills and liabilities are then deducted from that figure, plus of course the funeral expenses. Whatever is left may, or may not, attract IHT.
It’s a difficult and emotional time of course and the handling of estate disposal should be carried out with extreme sensitivity while always keeping an eye on the legal responsibilities surrounding payments due to the exchequer.