Inheritance tax is one of those dreaded and despised types of tax. Like someone having hacked a great big chunk out of your wedding cake before you get to cut it.

It can feel unfair. After all, you have paid tax on this money already. Why should you pay again?

Let’s say you’re getting on in years and have saved up a handsome sum of money. With the rise in rent and property prices, you plan to gift this to your grandchildren to give them a little headstart on life.

Will this be taxed?

Well, let’s first answer the question – What is inheritance tax?

What is inheritance tax?

Inheritance tax is a tax on the estate of someone who has died. The estate is all property, belongings and money.

When is inheritance tax not payable?

Inheritance tax is not payable if:

• The value of the estate is below the nil rate band threshold of £325,000
• Everything above that amount is left to a spouse/civil partner/charity/community club

If the value of the estate is more than £325,000 the amount over that could be taxed at the rate of 40%.

However, this can be reduced to 36% if you donate 10% of the estate to charity.

Gifting

When it comes to passing on your home, the tax differs depending on who you give it to.

• If you leave it to your spouse or civil partner when you die, no inheritance tax is payable
• If left to someone else in your will it will count towards the value of the estate
• If left to your children or grandchildren, that nil rate band increases to £500,000. This includes stepchildren, adopted and foster children but not nieces, nephews or siblings

While you are still alive and kicking you can also take advantage of the tax free amount of £3,000 you are allowed to gift per tax year. You are also permitted to carry this over once if you don’t gift one year.

There is also an amount of £250 you can gift to those that have not been beneficiaries of the annual gift allowance. This amount can be gifted an unlimited amount of times so even though it’s a small amount you could whittle away at things pretty quickly this way.

If the wedding bells are ringing for family or friends, this is also an opportunity to gift away those savings. This can be up to £5,000 for children, £2,500 for grandchildren and £1,000 for anyone else.

However, if you die within seven years of making any of these gifts they will be added to your estate. And if the estate then exceeds the nil band rate amount then you may be liable for inheritance tax.

There is such a thing called taper relief though, which means that the percentage of tax charged reduces the longer you survive into that seven year period.

For more detailed information on this and other tips to make sure your assets are put to the best use possible, you will find the links at the end of this article helpful.

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Grown-up children may have sound practical or financial reasons to stay, including shielding during the pandemic, caring for infirm parents, or being unable to afford a place of their own in an expensive part of the country.

Planning is the key and parents with both adult children living at home and elsewhere therefore need to think about their wills and make arrangements with how the property should be dealt with after their passing or they may risk protracted legal battles between siblings. Once the arrangements have been made in the will it is also best to make the family aware of the plans in advance to avoid the risk of misunderstandings in the future.

Very often grown-up children who have lived at home for much of their adult lives often believe they will either be entitled to continue living there after their parents have gone or be entitled to more from their parents’ estates than their siblings. This can then result in disputes with siblings who are not living at the property who are understandable keen to sell the property to release their inheritance.

How can parents avoid future strife over the family home? 

Have discussions with family members to ensure all understand their intentions with the property.  They need to make a will to record their wishes. Talking things over with all the siblings so they know what the will states means there will be clear instructions once you are gone.

What if you are an adult child living at home? 

There may be occupational rights acquired which may be invoked. If you can discuss a will with your parents and perhaps ask them to include something in the will giving you rights to reside in the home. This can cause conflict with the siblings that don’t live at home but if things are prepared and the parents let the other siblings know their wishes, this could avoid difficult discussions later.

What if your adult sibling is left a life interest in the family home? 

This should be discussed with all family members to avoid conflict.  If a life interest is bequeathed and other family members are unhappy, the Will can be challenged in certain circumstances.

The post How to Avoid Adult Siblings Falling Out Over the Family Home. appeared first on Ludlow Lane.

It’s safe to say most sectors in the legal industry have struggled to avoid delays during the Coronavirus outbreak but the probate sector has had to work tremendously hard to keep up with the influx of probate applications received as a result of the increase of deaths over the past year due to the pandemic.

However, after an effective start to the year probate grants being received have now beaten the number of applications received. This may have been helped by the application for a grant of probate being moved to an online system allowing firms to easily send the form directly to HM Courts and Tribunals Service without the worry of postal delays.

Firms applying via the online service are waiting merely four weeks which can reduce to up to one week if there are no missing documents or errors. Although those applying using paper forms can expect to receive grants within eight weeks.

Source – https://www.lawgazette.co.uk/news/probate-delays-falling-despite-pandemic-says-hmcts/5107267.article

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