Q&A - Could my mothers estate incur Inheritance Tax?

Q: I am an only child. My widowed mother has not made a Will because she believes everything automatically passes to me and she will not leave enough for it to be liable for Inheritance Tax. What exactly is Inheritance Tax and how much might I have to pay?

A: Inheritance Tax is payable on the value of your Estate when you die and can also be paid on assets you give away during your lifetime. It is payable if the value of your Estate is greater than the Inheritance Tax Free allowance (called the Nil Rate Band), which is currently £325,000 for the 2009-2010 tax year, but only on the amount by which your Estate exceeds the Nil Rate Band. Inheritance Tax is currently charged at a rate of 40 per cent.

Several factors can affect the amount of Inheritance Tax payable by your Estate. Any gifts made in the seven years before your death and whether you are the beneficiary under a trust will be considered when calculating the amount of Inheritance Tax payable. Where your Estate exceeds the Nil Rate Band there will be liability for Inheritance Tax unless your Estate passes to exempt beneficiaries such as a Husband, Wife, Civil Partner or a Charity, or where reliefs from Inheritance Tax are available, for example in relation to agricultural land and business property.

Additionally, it is possible for married couples and civil partners to utilise the unused Nil Rate Band of a deceased Spouse or Civil Partner without incurring liability to Inheritance Tax. However, this is not an automatic entitlement and working out liability for Inheritance Tax in such circumstances can be complex. Getting advice from a Solicitor experienced in private client work, which includes Estate and Tax planning, can clarify your situation and help you to minimise any Inheritance Tax liability with a tax-efficient Will.

Further information relating to this question is available by calling John Marshall, at our Wrexham Office on 01978 291456 or Herbert Jones,  at our Oswestry Office on 01691 659194 or Anthony Danvers,  at our Llangollen Office on 01978 860313.

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