Passing on Money - Inheritance Tax

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Inheritance Tax

Many people worry unnecessarily about tax taking a large slice of the inheritance they hope to leave to their families. In fact, under the regime in existence in 2000-1 only about four deaths out of every hundred trigger an inheritance tax bill.

There might not be any inheritance tax to pay on your estate at all, because:

• Tax is payable only if the value of your estate plus any taxable or potentially taxable gifts made in the preceding seven years come to more than a set 'tax-free slice', which was £234,000 in 2000-1.
• Some bequests are tax-free and are deducted from the value of your estate for tax purposes. These include bequests to charity and to your husband or wife.
  
  

If it does look likely that there will be inheritance tax on your estate, you can take certain steps during your lifetime to reduce or avoid the tax bill on death. But always bear in mind that ultimately inheritance tax is a problem for your heirs, not you. Do not jeopardise your present financial security simply to save your heirs some tax on their inheritance in the future. In particular, consider what resources you might need if you require specialist care in your old age.

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