Deborah Beal, Associate Solicitor - Wills & Estates at Thursfields
LLP, the Worcestershire-based solicitors, discusses this important aspect of future planning.
Inheritance Tax (IHT) is a tax on the estate (the property, money and possessions) of someone who’s died. How much you pay depends on the value of your estate – which is valued based on your assets (cash in the bank, investments, property or business, vehicles, etc.), minus any debts. There’s normally no IHT to pay if the value of your estate is below the £325,000 threshold, or you leave everything above the £325,000 threshold to your spouse, civil partner, or a charity.
If neither of the above applies, your estate will usually be taxed at 40% on anything above the £325,000 threshold when you die, although there are other allowances and exemptions that may be available. Depending on your circumstances, if you give away your home to your children or grandchildren on your death however, your threshold can increase to up to £500,000 and, if you’re married or in a civil partnership and your estate is worth less than your threshold, any unused threshold can be added to your partner’s threshold when you die. This means their threshold can be as much as £1 million.
Leaving something to charity in your will may also save your beneficiaries money. When including a charity in your will, your donation is usually taken off the value of your estate before IHT is calculated, and can reduce your IHT rate (if 10% or more of your estate is left to charity in your will, IHT will be charged at 36% of the net value of your estate).
The SVR Charitable Trust strongly recommends taking legal advice on this subject if applicable to your circumstances.
Providing for your loved ones is the most important thing to consider when writing a Will and undertaking IHT planning; however, once they have been considered you may wish to leave a gift in your Will to support the work of the Severn Valley Railway. One way of doing this is to include a residuary legacy to the Severn Valley Railway Charitable Trust. As can be seen from the examples, as above, the effect of such a charitable gift to the SVR CT can be substantial whilst still leaving a considerable amount to your family.