Estate planning involves organizing all of your assets so that they are put to good use whilst you are alive and also after your death. It is important to have this all arranged so that those key to you can also benefit from them once you die. In this way you can make sure that the wishes you have for your estate are met.
When it comes to estate planning there are several ways in which you can organize this. You could make a will or trust stating your desires for your assets or you could consider life insurance. If you carefully plan your estate and have a good will then you can avoid any future problems and ensure that your family will inherit what rightfully belongs to them.
Having a trust can be of great use not just to those with larger estates but also to smaller estates too. If this is something that you are considering then it is often a good idea to contact a specialist for help and advice.
Inheritance Tax is paid on your estate for everything that you own at the time of your death. It is also common to find that it is payable on some assets that you may have given away during your lifetime. This will include your property, possessions and money.
Does everyone have to pay Inheritance Tax?
No, Inheritance Tax is not something that everyone will have to pay. There is a threshold and therefore this type of tax only applies if the taxable value of your estate is more then £325,000 for the 2009-10 tax year. The amount of tax that will be payable is 40 per cent on the amount that is over the threshold limit.
There are some exemptions that mean you can pass on or gift smaller amount without having to pay Inheritance Tax. This could be if when you die your property etc goes straight to your partner, providing that you both live in the United Kingdom. The majority of gifts that are given more than seven years before you die will also be classed as exempt as will other gifts with a value up to £5,000, gifts to charity, and £3,000 given away each year.
How to pay inheritance tax
It is usually requested that you pay the Inheritance Tax within six months of the end of the month in which the deceased died. It is important to make sure you pay this within the time given or else interest will be charged. If you are ever unsure of how to pay then you should make sure that you seek the advice of a professional.
When you place one or more assets into a trust it is known as making a settlement or settling property, with each item being given a separate identity.
Despite each item being treated as a separate identity, you will always find that the total value of these is what will be used when deciding if a trust will be over the Inheritance Tax threshold and therefore if and how much Inheritance Tax will be requested.
When you transfer an asset into trust most will be liable to an Inheritance Tax charge should they exceed the Inheritance Tax threshold band
You can read more about Trusts here