Inheritance can be looked at from two different angles. The first angle is taxation and the second angle is what laws are applied to any foreigners that leave their property in the United Kingdom. Look at any restrictions that might be present and think about whether or not creating a will for you and your family is beneficial.
An individual that is United Kingdom domiciled is responsible for the Inheritance Tax on all of their worldwide items that they leave to their beneficiaries whether it is given as a lifetime gift or an inheritance. An individual that is not United Kingdom domiciled is only held liable for this tax for the pieces of property that are situated within the United Kingdom.
An inheritance tax is payable on transfers made by any individual when they pass on or within a seven year time frame before the lifetime transfer. The lifetime transfers that are transferred within the seven year time frame before the transferor dies are cumulated. Any taxable transfers that are an end result up to the inheritance tax threshold are tax free. For the years of 2008 through 2009 the threshold was 390,000 Euros and anything over this amount is taxed 40 percent. Currently, for the years of 2010 to 2011 the threshold is 325,000 GBP. It is possible for individuals that are both United Kingdom domiciled and those that are not United Kingdom domiciled to gain the advantages of certain exemptions and reliefs. Some of the inheritance tax transfers that are exempt include the transfer of property between spouses unless the individual who is named the beneficiary is not United Kingdom domiciled, if this is the case the exemption will be capped at 68,750 Euros. For this to be able to be applied to married couples or civil partners the representatives or executors have to have had transferred the unused inheritance tax of the first spouse to the other spouse after they die. Other examples are if lifetime wedding gifts are given that range from 1,250 Euros to 6,250 Euros depending on who gave the gift or transfers that are made to charities or political parties.
Any property that is inherited, which is able to be moved will be governed according to the law that the testator is domiciled in at the time of their death. If the property that is inherited is not something that is able to be moved such as land interests and mortgages then the location at which it resides in will govern it. The value of an estate has to be calculated in order for it to be determined whether or not they have to pay United Kingdom inheritance tax on it. Every asset of the deceased which includes the home, investments, and finances must be added up by the executor or by the personal representative; the assets will also include any items that were jointly owned by the deceased and trusts. Once totaled any debt that the deceased may have acquired must be deducted first.
United Kingdom inheritance taxes have to be paid in full no longer than six months after the individual passed away and it has to be paid by the executor or the personal representative. If this deadline is not meet then interest will be applied to whatever balance is remaining.
This post is contributed by Graeme McKay of Tax Debt Relief.
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