Hundreds of UK adults are expecting to pass on multi-million pound legacies when they die – yet many families are overlooking the Inheritance Tax (IHT) implications of doing so, research suggests.
In recent days, a survey of a thousand people carried out by financial services firm Canada Life has found that one in 25 British adults are expecting to receive an estate of £1 million or more from their parents or grandparents – while a further one in 50 believe that their elders will leave them an estate worth £5 million or more in their Wills.
Commentators have been keen to note that the findings demonstrate the “massive” increase in wealth British families have enjoyed in recent years, but that many might be disappointed to learn that a large chunk of their estates will be lost to IHT – particularly if they fail to seek specialist advice ahead of time.
Further research carried out by Canada Life in 2017 previously found that a staggering 70 per cent of UK adults who wish to pass a legacy to their family upon death were unaware of the residence nil rate band (RNRB) – important new legislation introduced last April which enables individuals to benefit from additional IHT relief when passing property to direct lineal descendants.
In the UK, IHT is payable at a rate of 40 per cent on any estates valued at more than the current IHT threshold or ‘nil rate band’ of £325,000.
However, under the RNRB, individuals can pass on an additional £100,000 in property value to children, grandchildren, step children or foster children completely free of IHT.
The rules surrounding the RNRB – and IHT in general – are complex and confusing, therefore individuals should always seek specialist legal advice.