Inheritance Tax is a tax paid on the estate of someone who has died, over and above a specified threshold. Inheritance tax may also be payable on gifts or a trust during a person’s lifetime. The current threshold for payment of Inheritance Tax is £325,000.
A married couple or civil partnership may increase their threshold for payment of Inheritance Tax. Married couples or civil partners may give assets to each other throughout their life or may leave assets to their spouse or civil partner, without paying Inheritance Tax. As a result the threshold for the first spouse or partner is unused and may be passed to the second partner or spouse when they die. The threshold will then be equivalent to £650,000 in the 2011-12 tax year. Any amount over the threshold for a particular year, is payable at 40 percent.
Inheritance Tax is typically paid by the personal representative or executor out of the funds from the estate of the deceased. The estate of a person includes all assets including money, investments, possessions and property. And debts, which may include funeral expenses and household bills to the date of death should be deducted from the total estate. It may be possible to pass on assets without having to pay Inheritance Tax in certain situations. A spouse or civil partner exemption allows a person to receive their partner or spouses assets without paying Inheritance Tax. Each year, a person may also give away up to £3000 every year without paying Inheritance Tax. There are other exemptions to payment of Inheritance Tax, and professional advice should always be sought.
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