The taxman has revealed that the amount of inheritance tax it has coined in from bereaved families has risen almost 23% in the first three months of this year. The latest figures show more than £2 billion has been taken from people's estates since March. The experts say this is likely to be because the taxman is looking more closely at the arrangements people have made for their death, finding mistakes, and reaping the benefits.
Sean McCann, a chartered financial planner at NFU Mutual said that usually when tax receipts rise like this, it's because of a surge in house prices. Given the lacklustre performance of the property market at the moment, however, the change is due to something else. "It's clear that the taxman is cracking down hard on inheritance tax by looking more closely at people's estates and challenging claims for reliefs," he says.
He points out that: "Inheritance tax is one of the more complex taxes and there are plenty of traps to fall foul of – as many families appear be finding out. The extra scrutiny from tax officials means those who haven't taken professional advice or planned early could be caught out. This could have a catastrophic effect on family wealth."
With the taxman looking closely, and keen to sting bereaved families who fall foul of the rules, it's worth considering your own arrangements, and whether they leave you at risk after your death.
3 Common mistakes
There are a number of things that can catch families out, so it's worth checking your arrangements so that you don't fall foul of these three common pitfalls.
1. Not giving things away soon enough
Often people try to give things away before they die, so they are no longer part of their estate when it comes to calculate the tax due. There are certain gifts that count as being outside of your estate immediately: you can give £3,000 a year away to anyone (you can carry over last year's allowance if you didn't use it too). You can also give any gifts of less than £250, and wedding gifts (of £5,000 or less to a child, £2,500 or less to a grandchild or £1,000 to anyone else). You can also give gifts to help certain people with living costs, and any gifts from surplus income.
However, anything except these exemptions doesn't actually count as being outside your estate unless you live for seven years after giving the gift. If you die before this, it will be brought back in when calculating the tax to pay,
2. Not giving things away properly
Typically this happens with the family home: the family may agree for you to give the house away, but continue to live in it. Unfortunately this is counted as a 'gift with reservation'. If you continue to benefit from something, the taxman assumes you haven't given it away at all, so it is included in your estate.
3. Not making a will after getting married/divorced
If you get married or divorced later in life, any existing will is nullified, so if you die, you will count as having done so 'intestate'. This means your estate will be divided according to strict rules, and any plans you made to mitigate inheritance tax will be undone.
Highest-earning dead celebrities
Highest-earning dead celebrities
MJ may have died over six years ago but his legacy still lives on. The King of Pop made $115m this year, but how? Cirque du Soleil in Vegas showcasing Michael Jackson One is one of the source's of Michael Jackson's cash flow but the Mijac Music catalogue and music sales also contribute.
Elvis pulls in most of his money from ticket sales at his Graceland home. Now it may seem surprising that this rock and roll legend could generate that much income from tours of his home, but it makes more sense when you realise a regular adult ticket will set you back $77!
The Marley Beverage Company and House of Marley are just two of the companies bringing in the big bucks for reggae legend Bob Marley. Music sales are also obviously a huge contributor with more than 75 million albums sold so far.
Celebrity fragrances might not really be that sought after any more but White Diamonds, one of Elizabeth Taylor's perfumes, was first released 24 years ago and continues to be sold to this day proving that maybe there really are some things that never go out of fashion.
Marilyn Monroe is undoubtedly still an international fashion and film icon. In 2011, Authentic Brand Group bought the rights to her brand and it's thanks to them that she's still pulling in top dollar as well as a clothing line at American store, Macy's, and a range of lingerie.
John Lennon was part of one of the biggest musical acts of all time, The Beatles, although unfortunately his stardom was cut short when he was shot dead in 1980. The songwriter still gets his share of the album sales though and is reported to take $12 million each year.
Einstein is one of the most famous scientists in history having come up with the general theory of relativity. Branded mechandise and memorabilia is the main source of the theoretical physicists revenue now though.
Paul Walker was just 40-years-old when he died in 2013 in a car crash, but his legacy still lives on thanks to the film franchise, The Fast and the Furious. The most recent film took $1.5 billion and although Walker died during filming, he still appears in the flick.
Bettie Page was one of America's iconic pin-up girls, even gaining the nickname 'Queen of Pinups' thanks to her trademark look. The model was also one of the earliest Playmates of the Month to feature in Playboy magazine. Page now makes most of her money at the hands of fashion, clothing and lingerie lines.
Theodor Geisel was responsible for some of the quirkiest and best-loved cartoon characters and children's book heroes. The artist and author published his works under the title of Dr.Seuss with some of his most famous creations including The Lorax, The Grinch and The Cat in the Hat still netting him money to this day.
Not to be confused with the award-winning film director of the same name, Steve McQueen was, at one point, one of the highest paid film stars in the world. Some of McQueen's most famous films include The Thomas Crown Affair, The Magnificent Seven and The Great Escape. His image is still used in adverts and commercials, bringing in $9 million worth of revenue.
James Dean was a certified heartthrob and cultural icon of the 1950s who sadly died in a car accident at the age of just 24. His iconic image has been used throughout the last 60 years in a variety of ways all of which have been bringing in the cash. Most recently Dean's image was featured on a designer Dolce & Gabbana tshirt.