Inheritance Wealth Set to Double over the next 20 Years
In 2026, 6.5% of estates are presumed to be liable for inheritance tax, an increase from the current 4.3% liable. With house prices rising and more people being liable for inheritance tax, there is no doubt that such tax avoidance measures, like making lifetime gifts, will continue to occur. The younger generations are set to receive double the current average sum by way of inheritance compared to now in 20 years' time.
It is expected there will be a 100% increase in inheritance wealth for the offspring of those born during the "baby boom" era (1946 to 1964), in research conducted by Resolution Foundation.
£200,000 to £400,000 is predicted to be the average inheritance received by those born past 1980. Figures also determine that the average age to receive a substantial inheritance will be 61 years old, as reported by Today's Wills and Probate.
When you see our specialist wills and probate consultants, you will receive advice on how the Inheritance Tax rules will affect you and your loved ones after you have passed away.
Who can inherit a deceased person's estate?
When someone dies, their estate will go to the beneficiaries that have been listed in their Will, or if they died without a legitimate Will, their estate will be distributed under the rules of intestacy, which may not necessarily be what the person would have wanted.
What is the inheritance tax threshold?
Where an estate is over the nil rate band (NRB) of £325,000, the standard Inheritance Tax rate is 40%. If an estate is worth below the nil rate band, it will not be subjected to inheritance tax.
How can I reduce the amount of inheritance tax on my estate?
There are many ways in which the amount of Inheritance Tax an estate has to pay can be reduced. Some of the actions that can be taken to reduce Inheritance Tax include:
- Leaving money to a charity - if a Will leaves more than 10% of the net value to a charity or charities, the Inheritance Tax rate will be reduced to 36%, reducing Inheritance Tax by 4% on anything above the nil rate band.
- Leaving the entirety of your estate to your spouse or civil partner - when you leave your entire estate to a spouse or civil partner, the estate will not be subject to Inheritance Tax. In addition, this also provides your spouse/civil partner with your unused nil rate band, increasing theirs to £650,000.
- Leave your family home to direct descendants (children, grandchildren, etc.) - The residence nil rate band (RNRB) can be applied when a property is passed onto direct descendants, which is an additional £175,000 in addition to the £325,000 nil rate band.
- Gift whilst you're alive - any gifts given within seven years of death could be liable for Inheritance Tax, and anything before those seven years is exempt. GOV.UK provides details concerning rules on gifts.
- Spend your money whilst you're alive - if you expect to be over the threshold, spending the money now will reduce your estate's worth, meaning it will pay less Inheritance Tax.
How can a solicitor help reduce the amount of inheritance tax an estate will pay?
The advice and guidance of a specialist inheritance tax planning solicitor will provide you with various options which help to reduce the amount of Inheritance Tax due on your estate in the event of your death. By doing this, you can ensure that your loved ones benefit as much as possible and in accordance with your wishes from your estate.