Inheritance tax, or IHT as it is commonly known, is payable on everything you have of value when you die, including:
It's usually payable on death. But there are certain circumstances, if you put assets into certain types of trusts, for example, when IHT becomes payable earlier.
When you die, your assets become known as your estate. Any part of your estate that is left to your spouse or civil partner will be exempt from IHT. The exception is if your spouse or civil partner is domiciled outside the UK. Then the maximum you can give them before IHT may need to be paid is £325,000. Unmarried partners, no matter how long-standing, have no automatic rights under the IHT rules.
Where your estate is left to someone other than a spouse or civil partner (i.e. to a non-exempt beneficiary), IHT will be payable on the amount that exceeds the nil rate threshold. The threshold usually rises each year but has been frozen at £325,000 for tax years up to and including 2017/18.
Your executors or legal personal representatives typically have six months from the end of the month of death to pay any IHT due. The estate can't pay out to the beneficiaries until this is done.
IHT is payable at 40% on the amount exceeding the threshold, although there are some exceptions. The liability can be reduced by placing life policies and investments in trust.
Everyone has their own thoughts on how they would like their estate to be distributed after their death. However, unless they've been written down in a will - a clear, legally enforceable instruction about what is to happen - it's unlikely they will be carried out.
Unfortunately, not enough people get as far as putting their wishes into a formal will. As a result, your estate is distributed according to the State's wishes and not your own.
If you don't have a will, your surviving spouse could lose a lot of control over their estate, which could dramatically affect their standard of living. Dying without a will is called 'dying intestate'.
Not having a will means the intestacy rules determine how your estate is distributed.
A Power of Attorney enables you to choose a person or persons (called an attorney) to deal with your property and affairs. Whereas a Power of Attorney ceases in the event of you becoming mentally incapable of managing your affairs an Enduring Power of Attorney will continue. It is important to remember that mental incapacity can happen to anyone at any time e.g. by accident or through illness.
Enduring Power of Attorney can be granted at any time provided you are over 18 years of age and mentally capable of understanding what the Enduring Power of Attorney is. Careful consideration should be given to the range of powers you wish to give to your attorney, for example, you may wish them to handle your money but you might want to exclude the sale of your dwelling house from their power. You can also specify that it cannot be activated until you are proven to be mentally incapable of making a decision.
Yes. You can cancel or amend the Enduring Power of Attorney at any time while you are mentally capable.
If the attorney you have chosen dies or becomes incapable or no longer wishes to act on your behalf you will need to appoint a new attorney.
If your attorney(s) have reason in the future to believe that you are becoming mentally incapable of managing your affairs they must apply to the High Court (Office of Care and Protection) for registration of this power. You will receive notification of the attorney's application to the court. The court may question the attorney's handling of your affairs and may cancel his power at any time if it is not satisfied that the attorney is acting in your best interest.
We recommend that you contact us to discuss how we can help you with this important area of Financial Planning.