How Inheritance Tax Affects You

Inheritance Tax is payable on everything that you own when you die and it is even payable on any gifts made during the seven years preceding the date of your death.

The Tax is payable at a single rate of 40% on estates above the threshold of £325,000 (this is called the "Nil Rate Band") the level of the Nil Rate Band may be changed each year on budget date.

Are There Any Exemptions From Inheritance Tax?

There are exemptions from the Tax, the most important ones of which are as follows:-

• All transfers of property between husband and wife but not between couples who are not married.
• Gifts which represent normal expenditure out of your income.
• Gifts not exceeding £3,000 in a tax year.
• Gifts to any one person in a tax year up to a total value of £250.
• Wedding gifts by a parent to his or her children up to £5,000 and by a grandparent up to £2,500 and by most other people up to £1,000.
• Gifts for the maintenance of children and dependant relatives.
• Gifts to certain organisations concerned with the preservation of the National Heritage or of a public nature. There are also exemptions and reliefs for particular charities, political parties and types of property for example business property, agricultural land, woodlands, works of art and historic houses. If you would like more information please ask us.

How Can I Minimise The Amount Of Inheritance Tax Payable At My Death

There are many ways in which Inheritance Tax at death can be minimised by careful planning. Some of the main matters which you should consider are as follows:-

Will Planning

If you believe that your estate will have a large tax bill to pay and if you have sufficient money to live on adequately, you might give some thought to tax saving devices now. We can provide you with further advice or assistance in connection with this.

Transfers Made During Lifetime

If you have a large estate on which Inheritance Tax will be payable then you should consider making gifts during your lifetime in order to utilise all the exemptions and reliefs available to you. Such transfers will be exempt from tax provided that you survive for seven years from the date of making the gift. If you do not survive for the full seven years, but for more than three years then tax is not charged on the gift at the full rate but at the following rates shown:-

Transfer Within	Percentage of IHT Payable
3-4 years	80%
4-5 years	60%
6-7 years	40%
7th year	20%

Life Assurance

You can take out life assurance policies which will meet your Inheritance Tax bills. The cost depends on your age and the amount of the tax liability. The cost may not be very high and if you would like us to obtain a quote for you, please let us know.

If your estate consists of life assurance policies which will be payable on your death, then you can avoid these becoming part of your estate by ensuring that they are written in trust during your lifetime to be payable to a particular named beneficiary. This means that the policy proceeds will not form part of your estate and therefore will not be taxable.

General Advice

We have tried to highlight some of the areas which may help you to minimise the amount of tax payable on your death. If you need specific advice please do not hesitate to ask us.

What is Parental Responsibility?

Some one has to be legally responsible for a child until it reaches eighteen. These people are called those with "Parental Responsibility". Having Parental Responsibility is not necessarily the same as being a parent and not all parents have Parental Responsibility automatically. Also, people who are not parents can be given Parental Responsibility.

Parental Responsibility is defined as "all the rights, duties, powers, responsibilities and authority which by Law a parent has in relation to the child and his property".

Who has Parental Responsibility?

These people have Parental Responsibility automatically:-

1. Married parents;
2. Unmarried mothers.

Married parents both continue to have Parental Responsibility even if the marriage breaks down. The only way that they or unmarried mothers can lose Parental Responsibility is if the Court makes an Order terminating it or if the child is adopted.

Unmarried fathers can obtain Parental Responsibility by:-

1. Making an agreement with the mother drawn up on a special Court form;
2. Successfully applying to the Court for Parental Responsibility;
3. Successfully applying to the Court for a Residence Order; or
4. Being appointed a guardian by the mother.

Step-fathers and step-mothers cannot simply acquire Parental Responsibility by marrying the parent of the child but they can, subject to satisfying certain requirements set out in the Act apply for a Residence Order, which if successful then confers Parental Responsibility on them. Parental Responsibility may also be acquired if the step-child is adopted by the step-father or mother.

Anyone with a Residence Order in their favour will also have Parental Responsibility. In this case Parental Responsibility lasts only as long as the Residence Order lasts.

Guardian

Step-parents do not automatically have the right to appoint a guardian of a step-child. They can only appoint a guardian if they have acquired Parental Responsibility by adoption or by a Residence Order being made in their favour.

Guardians can be appointed by parents (under a Will or in writing) or by the Court to care for the children after the parents die. A guardian will have full Parental Responsibility just as if he/she were the parent. Not everyone is willing to take on the responsibility of becoming a guardian to children who are not their own so a potential guardian should be asked in advance whether he/she would be willing to undertake this role. Deeds of Appointment or Wills can be drawn up by a solicitor. If the parents are not married, then only the mother can appoint a guardian unless the father has Parental Responsibility too. If he does not have Parental Responsibility he will have no rights to look after the children after the mother’s death. If the mother wants to appoint him as a guardian then she must do so by Deed or Will. If the father does have Parental Responsibility then he will automatically take over legal responsibility for the children after the mother’s death as a married father would. This is even if the parents are divorced and the mother has remarried.

The Act provides that unless the child is living under a Residence Order with the parent who dies then the appointment of the guardian will not be effective until both parents who have Parental Responsibility are dead.

We hope that the above comments are helpful but if you have any continuing queries, please do not hesitate to contact us.