What taxes will my estate incur and how will they be paid?

Inheritance Tax (IHT) is a tax levied on a deceased’s estate. The estate is, with a few exceptions, everything the deceased owns immediately before death. Normally the tax is charged at 40% of the value of the estate. However there are lots of exemptions that mean currently only about 1 in 20 estates pay any IHT. We explain these exemptions below. Leaving all or part of your estate to your husband, wife or civil partner The good news is that any gifts made in your will to your spouse or civil partner are free of IHT. In other words if you leave all your assets to your spouse or civil partner there will be no IHT to pay. Also any inheritance left to your spouse (husband/wife/civil partner) does not use up your ‘Nil Rate Band’. We explain what that is below. The nil rate band Each person has a “nil rate band” – an amount they can leave to anyone free of IHT. Currently the nil rate band is £325,000 per person. In other words, if your estate is worth less than £325,000 there will be no IHT to pay.If you leave part of your estate to someone other than your spouse or civil partner then this uses up your nil rate band. The nil rate band is “transferable” between spouses/civil partners. This means that when one spouse dies, any unused part of their nil rate band is passed on to their spouse/civil partner. Here is an example: Bob leaves an estate worth £500,000 on his death. He leaves £400,000 of his estate to his wife Mary – this...

What is ‘probate’?

Probate is the process of proving who is legally entitled to deal with the estate of someone who’s died. Commonly, it also describes the process of dealing with a deceased assets and affairs. Probate and Administration Technically probate only covers the situation where the deceased has a will which appoints executors. Where there is no will, or where there is a will but no effective appointment of executors, the process is called administration. Administrators are appointed by the court. Executors and administrators are together referred to as personal representatives. Executors apply for a “grant of probate”. Administrators apply for a “grant of letters of administration”. These are together referred to as “grants of representation”. Why are grants of representation important? Grants of representation are important because they show that the personal representative has authority to deal with the deceased’s estate. Applying for grants of representation – the steps involved Before applying for a grant the personal representatives must value the estate and report it to HMRC for inheritance tax purposes. Once the inheritance tax formalities have been completed, the personal representatives can apply for the grant of representation. To do this the executors or representatives will need to swear an oath. The content of the oath varies depending on circumstances, but it always includes: The deceased’s name, address and dates of birth and death. The personal representatives’ full names and addresses. A promise that the personal representative will administer the estate correctly. The personal representatives then send the oath, together with the will and any probate forms to the Probate Registry. Assuming all is in order, a grant of...

How do I appoint trustees in a Will?

If your will includes a trust, you must appoint trustees. To keep things simple, with an Affio will your trustees and executors will be the same people, so the same qualities of a good executor will also apply to your trustees. Ideally trustees should be someone: You trust to follow the instructions you make in your will and for any trusts needed. Who is organised and good at paperwork. Willing to take on the role. Who will have the best interests of the beneficiaries at heart. Who is likely to be around after your death, so probably younger than you are. Whatever arrangements you choose to include in your will, we’ll keep it simple, explaining everything you need to know and giving you all the information you need to make the right decisions for you. Related Articles: What is a trustee? Back to the Knowledge...

What is a ‘trustee’?

A trustee is a person who has legal responsibility for assets on behalf of somebody else, called the beneficiary. Trusts have all sorts of uses. They can be complicated they don’t have to be. In fact even the most simple of wills might require someone to take legal responsibility for assets on behalf of someone else. A good example of this is where a will leaves something to a child under 18 In that case a trust is needed to hold the assets for them until they reach 18 (or older if that’s what the will specifies). What does a trustee do? A trustee’s responsibility is to manage assets in the best interests of the beneficiary or beneficiaries. The trustee’s powers to deal with assets are governed by statute, as well as the terms of the will. Back to the knowledge...

Who should be appointed as an executor?

Being an executor is an important and sometimes demanding responsibility, so it is vital you choose yours with care. It is often a good idea to talk to anyone you’re thinking of appointing before you write your will to make sure they have a fair understanding of what will be expected of them and they are happy to take on this role. If they are not willing, they will have the right to refuse the responsibility when the time comes, so it makes sense to get their permission in advance. Who can be an executor? You can appoint anyone to be your executor. However they won’t be permitted to carry out the role after your death if they are under the age of 18, mentally unsound, or if you have divorced them after making the will. They may not be able to carry out the role if they are bankrupt or in prison. There is no rule against your executors also being beneficiaries, so by using a close family member or friend it doesn’t mean you have to write them out of your will. A good executor could be someone: You trust to follow the instructions you make in your will. Who’s organised and good at paperwork. Willing to take on the role. Able to cope (emotionally and mentally) with the responsibility so soon after your death. With experience of managing legal issues, although this is not essential because legal advice can always be sought (at the expense of the estate) if needed. Who’s likely to be around after your death, so someone who’s probably younger than you are....