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How To Leave More To The Kids

May 12, 2008
In heritance tax has undergone some changes of late that make it a much simpler process to leave your money and property to your children without them paying the penalty of inheritance tax quite so soon.

Will writing is sometimes a complicated business and people do not always realise the implications of what they leave to the people they leave it to. Anything over 300,000 pounds for an individual would incur inheritance tax and combining a couple's nil rate allowance was a little complex.

The couple would need to own separate shares in a property as tenants in common and set up a discretionary will trust when writing a will so that anyone inheriting their estate would not have to pay inheritance tax until they breached 600,000. pounds.

Although these so-called new changes are giving people what they already have, it does make the whole process easier. This change affects around 35,000 people a year in the UK which may not seem a lot overall but that is a lot of money that tax man makes!

By 2010 it is promised that the nil rate tax band for inheritance tax will increase to 350,000 pounds per person, or 700,000 pounds per couple. This is something that needs to be taken into consideration when will writing so that arrangements can be made for your children to receive as much as possible without paying penalties.

Opposition parties suggested the upper limit should be closer to one million pounds but The Chancellor put a stop to this and promised to spend the extra revenue on health and education. He has also promised that inflation and current house values will be taken into consideration when setting tax limits and as we all know this is a turbulent area of the country's finance at the moment.

Civil partnership couples will also receive the same tax benefits as married couples but not those that simply live together; proper arrangements need to be made when will writing.

There have been several occasions reported in the press, and many that have gone unreported, where will writing has not taken into account the difficulties of inheritance tax. This recently happened to an elderly woman who had lived with her sister all her life in one house. When one of the sisters died without proper consideration to will writing, the other was forced to sell her home in order to meet the charges of inheritance tax.

This seems rather a cruel way to end your days and if inheritance tax is not taken into consideration when will writing it can lead to the inheritor becoming deeply in debt. Never leave these matters to chance. Never assume because you have written down your wishes that that is the way things will go after your death.

When will writing, always ensure you get a professional to check over it and see if there is anything you can do to relieve the tax burden on those you wish to help after your death.

Over two million homes in the UK are now worth more than the 300,000 pounds inheritance tax bracket and the incidence of problems are occurring are becoming more widespread. By 2020 it is estimated that over four million homes will be subject to current inheritance tax laws. A tidy little some for the chancellor to inherit if will writing is not undertaken correctly.
About the Author
Financial expert Catherine Harvey looks at the way will writing should take tax laws into account.
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