When someone dies, their assets will typically pass on to another person, and this passing attracts something known as inheritance tax. There are many strategies which can be implemented in order to avoid the amount of inheritance tax that a person has to pay when they receive assets from someone who has died.
There is an initial allowance of £325,000 that can pass without attracting any tax and it is also possible to make gifts while alive in order to reduce the amount of money you pay when you die. It is important that people realise that these gifts can be given immediately before death. They must be given seven years before someone passes away in order for inheritance tax to be avoided.
Unfortunately, many people do not realise that they might be subject to certain inheritance tax issues, assuming that it is only something that affects the wealthy. In the last decade the number of people who will be subject to inheritance taxes increased significantly. It is estimated that the number of estates that would attract inheritance tax has risen from 20,000 to 50,000.
One of the main reasons for this increase is that the value of property has increased substantially. In 2000 the average home was worth £81,000, but today this figure is £167,000. This is a significant increase which means people are worth more, and are more likely to attract inheritance tax.
Many people think that inheritance tax is unfair as the money that has been used to accumulate this money that can be passed on, has already been taxed, often several times. Many people do not pay proper attention to how they are going to be taxed when they die, and those who they pass assets onto might find they are dramatically reduced by the government.