In the UK, at the time of writing, Inheritance Tax (IHT) may become payable where the value of ‘the estate’ (effectively the net worth) of an individual resident in the UK exceeds £325,000. If IHT is payable, it is usually paid out of the Estate by the Executor of the Estate or the Administrator of the Will.
Inheritance Tax, like most tax matters, can be a complex area and it is important to seek out specialist advice from your accountant or tax advisor sooner rather than later.
There are a variety of allowances or reliefs that may be available for the surviving spouse where one partner dies and, dependent upon the value of the estate and how the deceased’s assets are owned, there may well be no immediate tax to pay. In any event, it is likely that the Executor will need to apply for probate (in England and Wales) before the estate can be liquidated and assets distributed in accordance with any will.
The Inheritance Tax Rate is currently charged at 40% of the value of the estate in excess of £325,000, although this reduces to 36% where 10% of the estate is left to charity. There are a variety of allowances and reliefs available to an estate subject to Inheritance Tax and, for this reason, we recommend you take specialist advice. In particular, a surviving spouse may be able to claim relief on the immediate payment of IHT until after he/she has died also.
Many people owning property may consider it prudent to take advice when purchasing a property with their spouse or partner so as to avoid complications were one of them to die prematurely. This may include choosing how you wish to own your individual share of the family home and whether or not you take Life Insurance to help pay off all or part of the mortgage in the event of your death.
HMRC will usually demand Inheritance Tax is paid before they will release the estate’s assets and being unable to sell a home within the required time frame is not generally a good enough excuse not to pay IHT due! In some cases the Executor of the Estate may need to consider mortgaging or remortgaging property held within the estate so that IHT may be paid and tax penalties are avoided.
Once you have taken tax advice, we would be happy to help you consider the mortgage options available for this purpose.
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