Inheritance Tax

1. Understanding inheritance tax

Some Legal Facts.

In the UK, inheritance tax is typically charged at 40% on the value of an estate above a certain threshold, known as the nil-rate band, which is £325,000 as of the 2023/2024 tax year. Additionally, a residence nil-rate band (RNRB) can provide an extra allowance when passing on a family home to direct descendants. As we are probate professional we can:

Maximise Tax Reliefs: The RNRB can help calculate and apply the maximum tax-free amount to the estate by ensuring eligibility for both allowances. For instance, if a deceased person’s property is worth £500,000 and the deceased had a spouse who passed away previously, the RNRB could potentially increase the combined threshold, potentially up to 1 million pounds, significantly reducing a families IHT exposure.

2. Careful asset valuation

Proper valuation of assets is crucial in determining the estate’s total worth and corresponding tax liabilities. Liberty Legal Services are probate professionals and can:

Identify and Accurately Value Assets: we can ensure that all assets are correctly valued and consider specific reliefs or exemptions. For instance, certain business assets may qualify for Business Relief, meaning they may not be subject to IHT when passed on to beneficiaries. We can significantly reduce the estate’s taxable value by ensuring these assets are identified and accurately valued.

3. Leveraging existing tax reliefs

Numerous reliefs and exemptions are available to ease the IHT burden. As knowledgeable probate professionals, we can:

Implement Effective Tax Strategies: For example, gifts made during a person’s lifetime can reduce the taxable estate. Beneficiaries can gift up to £3,000 each tax year without incurring any IHT, plus additional regular gifts from surplus income. A probate professional may advise the deceased on making such gifts during their lifetime to minimise the estate’s eventual IHT liability.

4. Utilising trusts and estate planning

Establishing trusts as part of estate planning is another effective strategy that a, as probate professional, we can facilitate:

Setting Up Trusts: Trusts can pass on assets tax-efficiently. For instance, if done correctly, placing property in trust can remove its value from the
estate for IHT purposes

We can offer insight into the type of trust suitable for specific situations, helping to protect wealth while ensuring that taxes are minimised.

5. Navigating complex estate situations

Some estates come with complexities that a layperson would most likely, not know how to handle appropriately:

Addressing Multiple Properties or Investments: Estates containing properties in various jurisdictions or significant investments can present unique challenges. As probate professional’s we can help navigate potential tax implications and reliefs associated with these assets, ensuring all factors are considered to minimise the estate’s tax liabilities.