Inheritance Tax
This is a tax payable on an individuals estate when is passes from one generation to the next, therefore this tax does not become payable when assets pass to a spouse on death.
The Inheritance Tax threshold (or ‘nil rate band’) is the amount up to which an estate will have no Inheritance Tax to pay, from April 2009 the Nil Rate Band is £325,000.
If the estate, including any assets held in trust and gifts made within seven years of death – is more than the threshold, Inheritance Tax will be due at 40 per cent on the amount over the nil rate band.
Since October 2007, married couples and registered civil partners can effectively increase the threshold on their estate when the second partner dies - to as much as £650,000 in 2009-10. Their executors or personal representatives must transfer the first spouse or civil partner’s unused Inheritance Tax threshold or ‘nil rate band’ to the second spouse or civil partner when they die.
This can be a very complex and emotive area of advice and it effects an individuals world wide assets; insurance companies and product providers have been very active in developing financial products that will assist individuals in reducing and or mitigating the amount of inheritance tax that may fall due.