It doesn’t happen that often, perhaps once in most persons’ lifetime, but that expected, or unexpected inheritance is always welcome.
Those of a certain age, who have benefitted from the extraordinary rise in property values since the late 1960s, are now approaching that time of life when the grim reaper appears much larger than life on the not too distant horizon.
Ironically, many of these baby-boomers received precious little from their own parents and so those now contemplating their future legacies will be pleased to know that in most cases, whatever they receive will not create an additional tax bill.
In the UK, if an estate is under the current nil-rate band (£325,000), then no Inheritance Tax is payable. If the estate includes the family home this nil-rate band may be increased by new, additional relief. In a few years it is possible that certain estates of up to £1m will be exempt from IHT.
Whatever the tax status of an estate, any IHT payment must be taken care of by the executors before any distributions are made to beneficiaries. Therefore, what you receive is yours to keep; in most cases…
If you receive assets that produce income, shares for example, you will need to declare any income from those shares on your tax return and pay tax accordingly. Likewise, if you sell the shares after they have been transferred to you, you will need to pay CGT on the difference between the probate value and the sale proceeds.
As these baby-boomer gains start to work their way into the pockets of their children or other beneficiaries, it will be interesting to see how the proceeds of fifty years of property inflation are invested; or will they be consumed?
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