This document serves as a beginner's guide to inheritance tax planning, explaining the need for planning when receiving an inheritance and the applicable taxes. It covers essential topics such as inheritance tax thresholds, calculation of taxes, exemptions, and relief options like taper relief and trusts. The guide emphasizes understanding eligibility for exemptions to minimize tax burdens in the context of various relationships among beneficiaries.

1. Beginner’s guide to inheritance tax
planning

2.  Inheritance tax planning is an essential process
that is required when you are in a position to pay
an inheritance tax which could be a situation
where you are a beneficiary receiving an
inheritance from a deceased person.
 This inheritance could be a home, money, other
belongings of material value such as lands,
jewellery, cars, antiques etc.

3.  To make it sound even simple, if someone dies,
the person’s possessions will be passed down to
the spouse, children, other family members,
friends or even charity. In either ways, the
government is entitled to take its share.
 This is called the inheritance tax.

4.  For this reason, the inheritance tax is also known as
estate tax or death tax. However, there are certain
exemptions which could reduce your inheritance tax
and increase what belongs to your wallet.
 If you are looking forward to planning ahead to face
that unavoidable day when you or your family
member passes away, then you have to take time to
read this so that you can have an in-depth
knowledge of what inheritance tax planning is all
about.

5. Inheritance Tax Thresholds:
 The Inheritance Tax Threshold is the maximum
amount up to which an inheritance or estate will be
free from paying inheritance tax. In other words, a
certain amount of the assets of the deceased person
can be passed on to the heirs tax-free.
 This tax-free allowance is also called as the Nil Rate
Threshold or Nil Rate Band. The current Nil rate
band is £325,000 and it is subjected to remain so
until the tax year 2018.

6. How to calculate the amount of
inheritance tax?
 In order to calculate the total amount of inheritance
tax payable, non-exempt gifts made during the
lifetime of the deceased person must also be
considered.
 If the total amount of the non-exempt gift transferred
within seven years of death and the total value of
your property from the estate exceed the nil rate
threshold, then the inheritance tax payable is 40% of
the exceeding amount from the threshold.

7.  Apart from the heirs in the family, if there is any
charity that is to share the inheritance, the
inheritance tax amount reduces to 36%. This is
one of the possibilities where the inheritance tax
reduces.
 Apart from this, Taper relief is another such ways
where the inheritance tax value could be reduced.

8. Taper Relief:
 Taper relief is applicable if the deceased person has
made any gifts and dies within seven years of time
from making the gift. In this case the amount of
inheritance tax gets reduced.
 Now there is a common misunderstanding here that
the value of the gift is considered as the amount that
is to be reduced. Whereas, this relief denotes only
the amount of inheritance tax you that is payable and
not the actual value of the gift.

9. How are inheritance tax rates
calculated?
 Inheritance tax rates are calculated based on the
type of asset that has been inherited. It is also
based on the relationship of the beneficiary to the
person who died.
 Therefore, if you are eligible for an inheritance, it
is important that you also check if you are eligible
for an inheritance tax exemption. If you are
eligible, then you can very well apply for
inheritance tax deductions.

10.  Inheritance tax exemption rules vary within the
UK and in other countries. However certain
principles are common.
 A surviving spouse is eligible for the highest tax
reduction or otherwise he or she need not pay
any tax at all. Other lineal heirs like parents or
children are eligible for the least amount of
inheritance tax.

11.  Other family members, such as siblings of the
deceased person can pay slightly more than the
lineal descendants. But it is different in the case
of non-family members.
 Usually, non-family heirs will have to pay the
most inheritance tax.

12.  In case of an organization, trust or a charity that
receives money or asset of the estate, there are a
host of different tax rates that apply.
 However, charities don't have to pay any
inheritance tax at all on the money or any other
assets of the estate passed down to them.

13.  Unmarried or non-spouse heirs despite their long-
standing relationship are in no means eligible for
any kind of automatic rights under the rules of
inheritance tax.
 But in case they are given any part of the
property, they can reduce the amount of
inheritance tax payable only if the value of the
inheritance is less than the inheritance tax
threshold.

14.  Considering the person who dies, he or she
practicing certain occupations are also eligible for
inheritance tax exemptions. Farmers are eligible
for a complete tax exemption for gifts that are
agricultural lands and farms.
 Additionally, members of armed forces killed or
injured while on duty are also eligible for
inheritance tax exemption.

15.  In order to reduce the amount of inheritance tax
payable by the heirs, some estate planning firms
offer apt ways like creating trusts upon death.
 This way the deceased person owes some money to
charity including the assets passed down to his or
her children where the amounts of money are equal
to the inheritance tax threshold while the rest
belongs to the surviving spouse.

16.  Therefore, if you suddenly receive some money
or property, check if the person who died had
already paid taxes on the property or money
passed to you. If he or she did, then you may be
exempt from additional taxes.
 These are certain ways to receive inheritance tax
exemption provided you are eligible according to
the inheritance tax rules.
 To know more about on Inheritance tax relief Cork
visit Manning Financial,leading financial advisor
cork Ireland.