| p>Inheritance tax, or IHT, is the tax that may have to | | | | whatever exceeds that threshold. After three years, |
| be paid out of a deceased's estate to HM Revenue & | | | | there is a sliding scale so that the amount of tax that |
| Customs after death. An estate that is currently worth | | | | might be payable decreases by a fifth for each year |
| £325,000 or less is exempt from any IHT, however, | | | | until the seventh year when none is payable. |
| for estates worth over this threshold, tax can be | | | | As with all rules, there are exceptions. For example, |
| payable at 40% of the amount that exceeds | | | | you can give gifts to charity which will not be taxable; |
| £325,000. | | | | you can give away up to £3,000 a year, and |
| What many people do not realise is that IHT is | | | | £5,000 as a wedding gift to a child without the risk of |
| sometimes payable on gifts that were made to | | | | this being taxed, and you can make any number of |
| individuals within seven years prior to when the | | | | small gifts of up to £250 to as many different people |
| deceased died. This also applies to assets put into | | | | as you like without incurring IHT. |
| trust. And what sometimes comes as a shock to | | | | You should also be aware that problems can occur |
| some, is that where IHT is payable on those gifts, it is | | | | with gifts, if for example you have retained the use of |
| the recipient of the gift, not the estate, who is likely to | | | | the gift after the date that the gift was made. In this |
| be liable to pay the IHT. | | | | instance the gifts will be taxable outside of the seven |
| The rules are simple enough. An individual can make | | | | year window. |
| what gifts they like during their lifetime, but IHT may be | | | | If you think your estate, or a gift you have received, |
| payable in relation to such gifts. | | | | may be caught by inheritance tax it is important that |
| If the deceased dies within three years of making the | | | | you take professional legal advice so that you know |
| gift, and the estate is worth more than the IHT | | | | where you stand. |
| threshold then the recipient may have to pay 40% on | | | | |