Inheritance tax at 40 per cent could be payable on your estate after your death, if the estate is worth more than £325,000 (2010/2011 threshold - see HM Revenue & Customs site for latest figure) after debts have been paid. This tax must be paid before your named beneficiaries receive their share, unless they are exempt beneficiaries (see below).
This threshold may seem high, but your estate is the total value of your house and contents, car, savings, investments, jewellery, works of art and antiques, etc., less mortgage and other debts. A large number of people in the UK who would never class themselves as rich have belatedly realised that part of their estate will be liable to inheritance tax at 40p in the £. Fill out our Simple guide / Assets and liabilities checklist, checklist to help you to find the true value of your estate.
Yet this steep tax can be reduced or even avoided altogether if you plan well in advance.
Leave your estate to an ‘exempt beneficiary’, such as your spouse, registered civil partner or charity, and you may reduce or not have to pay this tax.
Any gift left to a charity in your will, including the Woodland Trust, is currently free of inheritance tax. Charitable gifts are deducted from your estate before your inheritance tax is calculated.
If the exempt gift(s) brings the total value of your estate to below the tax threshold, your remaining estate will not be liable for inheritance tax.
Inheritance tax can dramatically reduce the value of an estate, so charitable gifts can often be made with little effect on the value of the estate left to other beneficiaries.A codicil can easily be added to include a charitable gift.
Would you consider leaving a gift in your will?