Property prices are on the rise again, which means the value of homeowners’ estates is on the up. At Prestige Tax and Trust Services, we understand how important it is to protect your assets before you die so your loved ones don’t lose out when the bite of inheritance tax kicks in.
An estate encapsulates everything you own. That means your home, property, savings, possessions and even debt are subject to review when you pass away. The estate also includes the value of any gifts you’ve made to anyone in the last seven years before your death, which makes it near impossible to simply give away your assets to avoid the tax.
There are however a number of “allowed gifts” that you can make each year that will not be considered as part of your estate. They include but are not limited to:
- Gifts of up to £55,000 between spouses who are both domiciled in the UK.
- Gifts to charities, museums, the National Trust, amateur sports clubs and, of course, political parties.
- People getting married can received gifts of up to £5,000 from each parent on both sides; £2,500 from each grandparent; £2,500 from partner to partner, and up to £1000 from anyone else.
- Gifts of up to £250 to anyone, for example as a Christmas or birthday gift.
- Maintenance gifts to any dependents, for example a child (including step children and adopted children) who is under 18 or in full tie education.
The inheritance tax threshold for the 2013/2014 tax year is £325,000, though if your spouse has passed away and left you their estate, this threshold can increase to up to £650,000. Any amount over the threshold that is left following the payment of funeral expenses and any outstanding debts will be taxed at 40%.
It’s very important to make a will to ensure that your exact wishes are carried out after you’re gone. And if you want to further protect your assets, you should consider starting a trust in the name of whoever you want to benefit.