It is always lovely to hear from our readers and here are just a few of the legal matters that have been concerning you this month. Please feel free to e mail us on enquiry@dixonstewart.com if there are any matters that you would like assistance with
I have recently read that if I leave part of my estate to charity in my will the inheritance tax I pay on the remaining estate will be reduced. Is this true?
Yes in his 2011 budget Mr Osborne indicated that he wanted it to be come the norm that people leave 10% of the contents of their will to charity. To encourage this he agreed to reduce the inheritance tax levied on the estates of those who did this from 40% to 36%. In order to pay the reduced rate of inheritance tax you must leave at least 10% per cent of the net value of your estate to a qualifying charity. There are special rules for working out which parts of your estate qualify and if you would like further advices on this then please get in touch
My father died in 2011 leaving everything to my mother. My mother would like to give some monies to my brother and I. If she does this then does she have to survive for 7 years after making the gifts in order to avoid inheritance tax?
Your mother can give away a total of £3,000 in each tax year without incurring any inheritance tax liability. This is her annual allowance. If she were to give away more than this and then die within 7 years of the gift then the amount of the gift (less the £3,000 annual allowance) would be added into the value of her estate for the purposes of calculating the amount of inheritance tax payable. So for example if in the year before your mother died she gave away say £50,000 then £47,000 would be added back into the value of her estate upon her death for the purposes of working out whether any inheritance tax should be paid. Inheritance tax may then have to be paid on the gift.
In this instance because your father has recently died your mother can instead of paying the gift herself sign a deed of variation varying your father’s will. The gift is then treated as a gift from your father and if your mother dies within 7 years there will be no adverse inheritance tax consequences. There are of course other implications so it is important to take legal advice.
Interestingly the deed of variation could also be used to make a gift to charity if this would enable the estate to pay the reduced rate of inheritance tax. A deed of variation can also be used for other financial planning purposes including making the best use of your monies to pay nursing home fees. Again if you would like advices on this then please get in touch.
Keep your enquiries coming in. It is always good to hear from you
