Arford Henderson Law

Month: December 2019

Inheritance Tax liability

Why it is important to think about your Inheritance Tax liability

Taxes / By

The tax is usually paid out of the funds in the estate, or from money raised from the sale of assets if the estate has no cash. However, you may not want your beneficiaries to sell the assets as it maybe difficult for them to purchase another similar property due to the size of the Stamp Duty.

Sometimes, the deceased has left money in their estate to pay this tax. They may also have arranged for a life insurance policy to cover this bill. This is is an important consideration.

If there is a Will, it’s usually the executor of the will who arranges to pay this tax.

If there isn’t a Will, it’s the administrator of the estate who does this.

Once the tax and debts are paid, the executor or administrator can distribute what remains of the estate to the heirs.

When is the tax paid?

Inheritance Tax is normally paid within six months after the person’s death. If the tax is not paid within six months, HMRC will start charging interest.

HMRC can give the executor of the estate more time to pay the tax if certain assets in the estate, such as property, take a while to sell.

In this situation, your executor can ask to pay the tax in yearly instalments. But the outstanding amount of tax will still get charged interest.

If your estate is likely to incur Inheritance Tax, it’s a good idea for your executor to pay some of the tax even before they finish valuing the estate.

This will help the estate avoid getting charged interest if it takes longer to sell the assets to pay off the debts and taxes.

If the executor or administrator is paying the tax from their own account, they can claim it back from the estate.

Please contact me on [email protected] or 0207 041 6069 to find out how I can best help you protect your family and your assets.

How to use Trusts to ensure your estate is protected

How to use Trusts to ensure your estate is protected

financial security, Wills / By

There are various kinds of Trust. You can write a Trust into your Will, while others you can set up as a separate entity.

Some trusts will have to pay Inheritance Tax in their own right rather than as part of your tax bill; others might have to pay Income Tax or Capital Gains Tax.

The kind of trust you choose depends on what you want it to do. Here are some of the most common options:

  • Bare trust – the simplest kind of trust, a bare trust just gives everything to the beneficiary straight away (as long as they’re over 18).
  • Interest in possession trust – the beneficiary can get income from the trust straight away, but doesn’t have a right to the cash, property or investments that generate that income. The beneficiary will need to pay income tax on the income received. You could set up this kind of trust for your partner, with the understanding that when they die the investments in the trust will pass to your children.
  • Discretionary trust – the trustees have absolute power to decide how the assets in the trust are distributed. You could set up this kind of trust for your grandchildren and leave it to the trustees (who could be the grandchildren’s parents) to decide how to divide the income and capital between the grandchildren. The trustees will have the power to make investment decisions on behalf of the trust.
  • Mixed trust – combines elements from different kinds of trusts. For example, a beneficiary might have an interest in possession in (ie a right to the income of) half of the trust fund and the remaining half of the trust fund could be held on discretionary trust.
  • Trust for a vulnerable person – if the only one who benefits from the trust is a vulnerable person (for example, someone with a disability or an orphaned child) then there’s usually less tax to pay on income and profits from the trust.
  • Non-resident trust – a trust where all the trustees are resident outside the UK. This can sometimes mean the trustees pay no tax or a reduced amount of tax on income from the trust.

Please contact me on [email protected] or 0207 041 6069 to find out how I can best help you protect your family and your assets.

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