Posted on: 8th August 2017 in Retirement PlanningThere’s a tricky conversation about estate planning we all should be tackling with our parents: the one where we ask our parents whether they’ve got a Last Will and Testament. The sooner the better! We ask them straight out what they want to do with their assets when they pass on. It’s potentially very awkward. But we’ve got to do it sometime, and do it respectfully as well as systematically. Below Holborn Assets reviews some basic tips to make this chat easier. Talking to your parents about their financial legacy and their Last Will and Testament is more than a chat. It is the chance for a critical exchange of views, as well as an opportunity for family members to unite in a planning process that — if handled sensibly — can save fortunes and prevent family fallouts. The Telegraph cites figures from the Office of National Statistics that estimated the UK 2015-2016 inheritance tax haul at around £4.6 bn. Don’t be a contributor if you don’t have to! Speak to your parents, and get estate planning. Inheritance Tax: What are the basics again? Thought you’d ask that. The UK Treasury applies a 40% tax on any estate that has a total value of £325,000 or more — that’s the threshold. So, as per the GOV.UK website’s example, an estate worth £500,000 will be taxed at 40% of the £175,000 above the threshold — ie, £70,000 (enough for a mortgage deposit in most regions of the UK, or a nest-egg for the grandchildren). Leaving everything to children or grandchildren bumps up the threshold to £425,000. Furthermore, if a married person or civil partner passes away and their estate is worth less than the threshold, the unused threshold will be added to the surviving partner’s estate for when they pass, leading to a potential maximum of £850,000. The transfer of assets occurs as per the contents of a will, which is drawn up by a legal professional and signed by the owner bestowing the estate’s assets to beneficiaries. At the centre of the process of managing a deceased estate and tying loose ends is the executor — whose role also includes overseeing any tax concerns. The inheritors will pay tax down the line in areas such as the rental income from the tenant of an inherited property. Any exceptions? Sure. This 40% reduces to 36% on some assets when 10% or more of that estate’s net value goes to charitable causes. The tax bill might also be reduced if the owner of the estate gave certain gifts before they passed away – though WHEN exactly they gave that gift makes ALL the difference. Family trade? You can get Business Relief of either 50% or 100% on some of an estate’s business assets, which can be passed on when the owner is still alive or as part of a will. These assets include property, machinery and unlisted company shares. What’s more, some estates are ‘excepted’, either because they are low value, are exempt estates, or are foreign domiciliaries. You can apply for confirmation as to whether an estate will have inheritance tax to pay after the owner has deceased by using the UK Government’s IHT 400 form. So what kind of questions should I ask my parents about their estate planning?
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