Finance Guide

Inheritance tax is a tax levied on the assets inherited by one person from another following the death of the original owner. Normally, it only applies when assets inherited are fairly substantial in value so that most people will never have to worry about inheritance tax. In cases where assets other than money are being inherited, those assets will have to be valued so that they can properly be taxed. Sometimes, in inheritance tax settlements, the government is willing to accept assets in lieu of cash. For example, it is not uncommon to hear of stately homes which gave up an Old Master painting to the care of the government to settle an inheritance tax bill.

When inheritance tax is applied, there is typically a certain amount that can be transferred without paying tax. Above that threshold value, the tax will be applied. There are usually cases where bequests are exempt from inheritance tax. For example, when assets are transferred to a spouse, no tax need be paid. Other exemptions may apply to charitable bequests. Dispositions of assets in the years preceding death can also be subject to inheritance tax so giving it all away before the end is not necessarily enough to escape the tax man’s clutches.