What is inheritance tax?
When someone dies, inheritance tax is payable on all their assets over a certain level (the 'nil rate band'), subject to various exemptions and reliefs. The current rate of taxation is 40%, and the nil rate band for the tax year 2005/06 is £275,000.
Who can benefit from my estate?
The first thing you need to do is decide who should benefit from your estate. Some types of estate planning pass the tax liability on to the person who benefits. For example, any assets passed to a husband or wife are exempt from inheritance tax (as long as they live in UK). However, passing assets to a husband or wife simply delays inheritance tax liability until their death. So you may want to skip a generation and pass your estate on to your children or grandchildren, for example.
Can I leave any assets to someone outside my family?
Gifts to charities or political organisations are exempt from inheritance tax, whether they are included in a will or made during your lifetime.
Why is it important to make a will?
A will is the first step in effective estate planning. It is especially important for people who are unmarried or have unusual family circumstances. If you don't have a will when you die, some surprising people could benefit.
Can I decide who my pension scheme benefits should go to if I die?
If you are a member of your company pension scheme, the benefits will normally go to the person you have nominated. It is important you review this regularly and update it when necessary. If you have a different type of pension scheme, it may be possible to take action to ensure that the benefits are not liable to inheritance tax.
Next steps
If you would like more information about our estate planning packages, you should talk to your financial adviser.
Further information... Who should I talk to?
Speak to your financial adviser to find out more. If you don't have an adviser, the IFA Promotion Service or the Society of Financial Advisers can help you find one.
