Reasons to choose Wilson Browne
You may have read about the recent case of the late Tom Makin, the son of the founder of JD Sports, who sadly passed away after suffering from bone cancer aged only twenty nine, leaving behind his wife and two children.
Mr Makin owned his £1.8million home in Bury and a year before they married, he transferred to his then wife to be, Kirsty, a half share in his property, without realising the implications of this gift. By making the gift before they were married, an Inheritance Tax bill for as much as £300,000 could now be payable.
What exactly is Inheritance Tax?
Inheritance Tax is a tax paid on the value of an estate which exceeds the tax threshold, currently £325,000. Gifts that you make during your lifetime may have tax applied after your death, and this will largely depend on when exactly you made the gift and who the gift was made to.
In respect of Inheritance Tax, any lifetime gifts are regarded as “potentially exempt” and only become wholly exempt if the person making the gift survives by seven years. If you die within seven years, the gift may be subject to Inheritance Tax.
In the case of married couples, they can make gifts without incurring an Inheritance Tax charge. This means that any assets passing on death to the surviving spouse/civil partner, or given by way of a lifetime gift, will be exempt from any Inheritance Tax liability.
However, gifts between couples who are unmarried can cause problems. Any unmarried couple will not benefit from the spouse exemption and so should consider any gifting carefully to avoid an Inheritance Tax liability.
Due to the fact that Mr Makin made the gift, and at the time of the gift they were not married, the family now have to apply to the Court with the hope that the gift can be withdrawn for tax purposes.
The sadness of this case is that if Mr Makin had left the property to Kirsty in his Will instead, this problem would not have occurred. As they were married at the time of his death, the property would have passed free of tax through spouse exemption, provided his Will was executed after marriage or a contemplation of marriage clause was included.
This case highlights the importance of seeking professional legal advice in respect of any gifts or transfers you may wish to make during your lifetime to avoid the risk of any future tax bills.