How to avoid paying inheritance tax unnecessarily

Administering the estate of someone who has recently died is often far from straightforward, and navigating your way round the various reliefs and exemptions potentially available for that particular estate can be a stressful experience.

Many executors who have attempted to administer an estate without legal help-not realising that reliefs and exemptions don’t come automatically and must be claimed –can find themselves answering to irate beneficiaries who’ve discovered unnecessary inheritance tax has been paid.

Anecdotal evidence suggests this is particularly true in respect of exemptions that may be transferable between spouses/civil partners. Gifts between spouses/civil partners are exempt from Inheritance Tax. It’s often the case that the first to die leaves their entire estate to their surviving spouse or civil partner and therefore the exemption available for gifts left to someone other than a spouse or civil partner (known as the Nil Rate Band which currently amounts to £325,000) is not used.

Provided the person who died first had not made any gifts in excess of the tax-free annual allowance in the seven years prior to their death, then the full unused Nil Rate Band remains available and the executors for the second spouse/civil partner to die can make a claim for that unused exemption to be transferred.

HMRC imposes very strict time limits on making these claims, however, very rarely allowing claims out of time, and sadly there exist numerous cases in which executors have, for various reasons, delayed dealing with the administration of an estate only to find that they are too late to claim any exemptions.

Where an estate is worth, say, £650,000 and is left by an uncle to his nephews and nieces and where his wife did not use her Nil Rate Band having left her entire estate to him, if executors fail to claim the unused Nil Rate Band within the prescribed time limit this could result in a £130,000 Inheritance Tax bill. And some pretty irate beneficiaries!

Our highly experienced solicitors can ensure this doesn’t happen to you. Contact us today.