How a Will could save you Tax
Inheritance tax at 40% is payable on your Estate after your death, if the Estate is worth more than the £325,000 2009/10 threshold after debts have been paid. This tax must be paid before your named beneficiaries receive their share.
This threshold may seem high and you may think that your Estate cannot possibly be worth that, but you’d be surprised! 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 Pound.
Inheritance tax can be reduced or even avoided altogether if you plan well in advance. Your Solicitor will be able to advise on Estate Planning.
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 the tax. Any gift left to a charity in your Will, including the CBA, 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 in some instances charitable gifts can be made with little effect on the value of the estate left to other beneficiaries. Wouldn’t you rather your favourite charity receive a Gift than the Tax man takes a lump of your estate?
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