Dying in the UK costs, especially if you've a sizeable estate to pass on.
And we're not talking funeral expenses here. We're talking inheritance tax.
First the good news! If your estate - literally everything you own at the time of your death (and perhaps more) - is worth £285,000 or less (2006/2007), then you don't pay any inheritance tax.
But, if it's worth more than that figure (the nil-rate band), then you could be liable - and the tax rate is 40%.
By the way, the value of your estate on death ALSO includes any money, gifts or assets you may have given away or transferred during the seven years up until your death.
Such gifts transferred while you are still alive are known as potentially exempt transfers. No tax is due when you make the transfer.
However, if you die within three years of the transfer, full inheritance tax is payable.
If you live for more than three years after the date the money, gifts or assets were given away, the inheritance tax due is reduced (tapering relief), by 80%, 60%, 40% and 20%, corresponding to years four, five, six and seven of the seven years respectively. More than seven years and inheritance tax is zero.
There are a number of exemptions, including transfers between spouses, both during their lifetime and on death.
Spouses in this context also includes same-sex couples, registered under the Civil Partnership Act.
Wedding gifts of up to £1,000 are also exempt (£5,000 for gifts from parents or £2,500 from grandparents), as are donations to charities or political parties.
There are more exemptions than those listed above. So check with your financial adviser.
