Dealing With Inheritance Tax

When someone dies any private property and possessions owned by that person becomes known as his or her estate. It becomes the duty of a chosen executor (as stipulated in the deceased’s will) or administrator (appointed by law if no will exists) to, among other things, have this estate assembled and documented, valued, taxed correctly and finally distributed it to those who stand to inherit either by the terms of the deceased’s will or by the laws of intestacy/succession (if no will exists). Dealing with Inheritance Tax can be a headache, but it must be done before the estate can lawfully pass hands to those who stand to inherit.

Assembling and Documenting the Estate

Whoever is appointed to act for the deceased’s estate will need to assemble and document (as much as possible) the deceased’s possessions. Very often details of the estate – both debts and assets – will be found in the deceased’s personal documents or held with his or her solicitor. Common items in many estates include:

• Current, savings or building society accounts.
• Private property, or shares in private property.
• Jewellery.
• Family heirlooms.
• Art.
• Vehicles.
• Stocks, bonds and/or other financial instruments.
• Private pensions.
• Items of historical value.
• Trusts.

Valuing the Estate

While it is possible for the executor or administrator of an estate to value it by him or herself, it is best to use a professional valuer who understands the delicate details of this process. For example, there may be situations in which there are items that the deceased gave away but in which (s)he still kept an interest and/or items that were given away within the last seven years that will need to be included in the valuation. Debts too will need to be factored, including outstanding mortgages, unpaid bills and funeral expenses, among other things, as well the value of any trusts. Professional valuers or chartered surveyors (in the case of property) will be able to determine the open market value of the estate which is needed for tax calculation purposes.

Paying Inheritance Tax

If the estate is valued at higher than £300,000 (for the tax year 2007 - 2008), £312,000 (2008 – 2009), £325,000 (2009 – 2010) and £350,000 (2010 – 2011), then the value of the estate above this figure will be taxed at 40%. If it is likely that some Inheritance Tax will be due, then Inheritance Tax form IHT200 should be filed. Generally the Inheritance Tax due will need to be paid within six months from the end of the month in which the death occurred or interest will begin to accrue. There are many methods by which Inheritance Tax may be paid, including by cheque, transfer or giro from a personal account (including one held or jointly held by the deceased), with British Government Stock that was held in the deceased’s name or with National Savings investments that were held in the deceased’s name. Once this tax has been paid, a “clearance certificate” can be issued upon the filing of form IHT30.

Dealing with Inheritance Tax is usually a complicated matter, one that is best sorted with the help of professional valuers and experienced solicitors. The Probate and Inheritance Tax helpline (0845 3020 900) is also available to answer questions during working hours on Mondays through Fridays.