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Excepted Estates

Inheritance Tax applies to everything, doesn’t it? Well, not quite. There are some estates – known as ‘excepted estates’ – for which there is no requirement to pay any Inheritance Tax. It all depends on a combination of value, the deceased themselves, and various other factors such as charitable gifts.

The rules are not set in stone, and do require an expert to sort through, but in general, an estate will be known as excepted if it falls below the Inheritance Tax threshold (currently £325,000), if the deceased left the entire estate to a spouse or civil partner, or to a charity (as long as the estate is valued at less than £1 million), or if the deceased had their permanent, main home abroad (known as a ‘foreign domiciliary’).

In addition, if the deceased died after 6th April 2010 and the estate is under double the Inheritance Tax limit (that is, if it is less than £650,000), or if a partner’s estate was not subject to Inheritance Tax, and the threshold can be transferred to the deceased’s estate, then there will be no tax payable, and the estate will be considered excepted.

An estate is, therefore, not excepted if it fails to meet the above criteria. However, it would also be considered not excepted if the deceased had once had a permanent home within the UK (even if they lived abroad when they died), if they had a trust valued at more than £150,000 or assets worth more than £100,000 (outside the UK), or if they had made any gifts in the seven years before they died that might be considered subject to Inheritance Tax. Other exemptions include certain life insurance schemes or pensions.

There are many different ways that an estate can be considered excepted, just as there are numerous paths that will show that the estate is not excepted! The best way to be sure is to contact an expert who can confirm what is and what isn’t subject to Inheritance Tax.

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