About Inheritance planning

Inheritance tax (IHT) is based on the total value of your assets when you die. If your assets are worth more than £325,000, there could be IHT to pay. These assets (often called your estate) can include:

• Property - including your main home and any holiday homes – even homes overseas
• Investments - cash in your bank account, ISAs, company shares and other investments
• Life insurance - payouts under most life assurance policies not written under trust
• Other valuables - such as cars and jewellery

IHT is payable when the person who owns the assets dies. The tax payable is based on the total value of assets at the time of death. If any assets have been transferred during the previous seven years, they’ll be included as well.

The current rate of inheritance tax is 40%, but some transfers made more than two years before death could qualify for a lower rate.

At the moment, the inheritance tax rate is 40%. However, some gifts made more than two years before your death could qualify for a lower tax rate.

Imagine you owned your own home, had some life assurance policies and an expensive car. Your estate could be worth half a million pounds.

With no inheritance plans, the taxman could take a staggering £70,000 in IHT when you die. This example is based on 2010/11 tax rates and bands.

• Find out how to reduce your IHT liability

Take action to reduce your inheritance tax liability

There are several actions you can take to minimise your inheritance tax liability.

A will is the starting point in any effective inheritance plan. You can use your will to make sure your assets go to the people you want them to, without long delays or any fuss. A will can also help to highlight areas where some other action could be taken.

• More on the RBS Will Writing Service

Some lifetime gifts are exempt from inheritance tax. By making tax-exempt gifts every year, you can help reduce your inheritance tax bill.

Life insurance policies written under trust for named beneficiaries aren’t included in your estate for inheritance tax purposes. This means that your dependants can use these policy benefits to pay any inheritance tax bill.

Get financial advice

If you want to talk to RBS about inheritance planning or will writing, call us on 0800 051 1872.

• Inheritance tax is among the most hard-hitting UK taxes. A flat rate of 40% is charged on the value of your estate over the nil-rate-band threshold – currently £325,000.
• A grant of probate – ‘confirmation’ in Scotland – isn’t usually released until any inheritance tax has been paid. This could put your family under pressure to borrow money or even sell assets to pay it.
• In recent years growing property values have outstripped increases in the inheritance tax nil-rate band.

For many people, their home is likely to be their single most valuable asset. But what else can be taken into account?

HM Revenue and Customs can include a range of other assets in your estate when working out your inheritance tax liability. These could include your car, life assurance policies not written under trust, deposits with banks and building societies, and other investments such as company shares.

Get financial advice

If you want to talk to RBS about inheritance planning or will writing, call us on 0800 051 1872.

Some lifetime gifts are exempt from inheritance tax. We’ve included the main ones here. If you transfer assets to your spouse, this will always be exempt as long as they have a permanent UK home.

For more information on making the most of your exemptions, call us on 0800 051 1872.