| When suffering the loss of a family member or when | | | | Due to the £263,000 inheritance tax threshold, |
| they become too unwell to take care of themselves, | | | | more people on average incomes are being plagued |
| the last thing you need on top of the grief and stress is | | | | by inheritance tax. Careful planning must go into |
| property IHT. This tax was originally designed to only | | | | decreasing your inheritance tax liability. "Gifting", or the |
| affect the more wealthy property owners, however | | | | passing of wealth over a lifetime, is your best way of |
| with property prices sky rocketing this tax is now | | | | getting around this, but most people need professional |
| affecting the less fortunate as well. There are places | | | | advice to know how to use it properly. Many people |
| online where such matters can be discussed for | | | | these days do not know that ISAs (individual savings |
| example a property investment forum. However your | | | | accounts), which are free from tax in life, may be |
| best defence is to have an IHT tax strategy in place, | | | | taxable on death. However, jointly owned property for |
| especially when house price in the South East, which | | | | a married couple is generally exempt as well as |
| can be sold for around £400,000, and property | | | | pension fund payments. Problems can still ensue, |
| IHT can be charged at 40% on estates worth more | | | | however. Women who are not married but live with a |
| than £285,000. | | | | partner and joint-own a property should make certain |
| How it affects your family | | | | their name is on the deeds. If they are not and one of |
| First thing you should know is that you cannot give | | | | them dies, the partner may have a wrangle on their |
| away the family home to anyone (including your | | | | hands. The main way around inheritance tax is making |
| children) to lower property IHT liabilities while you live on | | | | gifts. As long as you make the gift and survive seven |
| the property. This may be considered a "gift with | | | | years, no IHT needs to be paid on the gift's value. |
| reservation", and still be subject to property IHT. There | | | | How to avoid property IHT |
| are annual exemptions, however. For instance, you are | | | | The best IHT tax strategy to avoid property IHT is if |
| allowed a property IHT -free gift of £3,000 | | | | the individual who survives for at least seven years |
| every year. Anything left over can be carried on to the | | | | after the money is given. Then the sum is considered |
| next year. Parents may give wedding gifts to their | | | | a gift or potentially exempt transfers. Another way to |
| children up to £5,000 free of property IHT. | | | | protect the money is if the grandparents open up a |
| Grandparents may give up to £2,500. Of | | | | trust account where money will be kept until the |
| course, they must give these gifts before the official | | | | account matures, usually between the ages of 18-25. |
| wedding date. Small gifts of £250 may be given | | | | However if the individual gives the gift before the end |
| to anyone in any tax year. Any donation made to a | | | | of the seven year period a special relief known as |
| UK established charity, political party, national museum | | | | taper relief may be available which will reduce the |
| or university is completely exempt from property IHT. | | | | amount of property IHT that needs to be paid |
| What can be taxed and what can't | | | | depending on the size of the gift amount. |