The cost of living crisis has hit us all hard, especially following the troubling pandemic years. Rising living costs affect inheritance figures, with many unsure how to tackle the issue. This blog looks at how this extreme cost of living crisis Impacts inheritance.
Reduction in Assets
With interest rates skyrocketing and energy bills doing the same, many people are having to rely on assets and savings. This may mean downsizing to a smaller property to free up money to live off of or simply dipping into savings. Due to this, their dependents are likely to receive less inheritance when that time comes.
Average Estate Value
Since the pandemic and the start of the cost of living crisis, an estate’s average estimated value has significantly reduced – more than 20% in many cases. Many people have larger mortgages now and more debts or have downsized their property. This inevitably means they will be leaving less inheritance.
Nil-rate Band
Housing costs have increased over the past ten years. But inheritance hasn’t experienced the same change. With inflation, the nil-rate band has not grown. Instead, the £325K nil-rate bracket for tax-free inheritance and the £175K nil-rate for primary residence have stayed unchanged. This ceiling is fixed until the 2025–2026 tax year.
Making an effort to get around the inheritance tax issue is essential for good preparation. Utilising exemptions and allowances is one strategy to lessen the issue. Fortunately, you have a number of other options to ensure you maximise your estate:
- Have a current and valid will
- Make gifts each year to your beneficiaries while you are living
- Research and invest in good insurance policies
- Research and use trusts
- Make tax-efficient investments
Here are some important inheritance-related things to be aware of:
- The surviving partner is exempt from paying asset taxes if one spouse dies.
- If they leave their possessions to their children, they won’t be taxed until the second spouse passes away.
- Inheritance tax is applied to gifts made to trusts.
- If the person gifting dies within the first seven years of a gift, inheritance tax is due.
- Everything within an estate must be considered when calculating inheritance tax.
Tax-Free Donations to Political Parties and Charity
100% exemption is also possible for commercial and agricultural assets/properties, but only after fulfilling specified requirements. Depending on specific criteria, alternative investment market shares for trading companies may be completely exempt.
Contact Fleetwood Heir Hunters on 0208 9707486.