In case of death of a person, his/her possessions and assets are passed on to family or friends or in some cases charities or trust. However, UK law has designated procedure for transfer of properties and assets, and taxes any benefits you receive by way of inheritance. This is extensively covered by Wills Probate and Inheritance law.
The first step will be to ascertain if there is a valid will. If the deceased have left some instructions before death, ‘executors’ will be appointed to carry out such instructions or tasks. After adjusting for whatever the deceased owed to others, the left out possessions and assets will be considered the deceased’s estate.
However, if the person has died ‘intestate’- without a will, wills and probate laws will come in application. The next of kin will be appointed as ‘administrator’ to sort out the estate as opposed to an executor in case of a valid will. The intestate laws will prohibit passing of estate to unmarried partner, step children, friends, charities or other organisations.
Financial dependants, co-dependants (eg; those who shared household bills) , married partners, civil partners, children, adopted children may be able to claim property possession in case of intestate death. However, will probate UK law may have different scope to that of laws in Scotland and Northern Ireland . It will be wise to appoint a solicitor in any case.
If the deceased had passed on any gifts in last seven years of life and such gifts or assets are valued above £325,000, tax will be due on such transfers. Any amount below this is tax free allowance or nil rate band. It will be duty of the executor or administrator to ascertain the existence of such gifts or transfer of assets and to complete inheritance tax form and send it to HMRC.
As per will, probate and Inheritance laws if the spouse or partner of the deceased died before the later, any unused tax allowance of first death can be aggregated to increase the tax free allowance of the deceased. However, the executor or administrator will have to make a special claim for it through HMRC website.
The wills & probate laws may be relaxed in case of smaller estates that comprise of just a bank account with value less than £5,000. The bank or saving provider in question may release the funds without any extensive probate procedure. Where no inheritance tax is due, only the shorter version of inheritance tax returns need to be filed.
In most cases where the estate comprises of money, the inheritance bears its own tax. This means you will be given the estate after the tax is paid. Complexities arise where such a provision is not possible as in example of property. In such instances the receiver will have to bear the burden of inheritance tax.
To make issues even more complex, even though you receive inheritance after a several months long process during which executors or administrators sort out the estate, for tax purposes you will be treated as if you received the inheritance instantly upon the death. In addition, if you receive investments or antiques, you will be liable for capital tax on profits when you sell them.
The capital tax will be determined by finding difference between the sales value and value of asset at the time of death of the deceased. Each year, there is a certain limit of tax free profits. There will be no separate allowance for inheritance. A person will just have one tax free capital allowance limit that will include inherited as well as personal asset sales.
Accepting an inheritance is not mandatory on an individual. In case the nominated heir refuses to accept the inheritance, the executor or the administrator will have to sort out who gets the inheritance. As per wills and probate, you can change the will or the way an estate is inherited if you can seek deed of variation from court. This must be within 2 years of death.
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