What is the inheritance tax allowance for a married couple?
Inheritance tax is a complex and often misunderstood tax that is levied on the estate of a deceased person. One of the most frequently asked questions regarding inheritance tax is about the allowance for married couples. Understanding this allowance is crucial for individuals and families to effectively plan their estate and minimize tax liabilities.
The inheritance tax allowance for a married couple refers to the amount of money or property that can be passed on to a surviving spouse without being subject to inheritance tax. This allowance is designed to provide some relief for married couples and ensure that they can pass on their assets to their spouse without incurring significant tax burdens.
In the United Kingdom, the inheritance tax allowance for a married couple is known as the “spousal exemption.” Under this exemption, a surviving spouse can inherit the entire estate of their deceased spouse without paying any inheritance tax. This means that the estate can be passed on to the surviving spouse tax-free, regardless of the value of the estate.
However, it is important to note that the spousal exemption only applies to assets passed on directly to the surviving spouse. If the deceased spouse leaves assets to other beneficiaries, such as children or grandchildren, those assets may still be subject to inheritance tax. In such cases, the surviving spouse may be able to claim the residence nil rate band, which is an additional allowance that can be added to the spousal exemption.
In the United States, the inheritance tax allowance for a married couple is known as the “unified credit.” This credit allows married couples to pass on a certain amount of assets to their heirs without incurring inheritance tax. The unified credit amount is adjusted annually for inflation and as of 2021, it is $11.7 million per married couple.
It is important for married couples to understand the inheritance tax allowance and how it applies to their estate planning. By taking advantage of the available allowances, couples can ensure that their assets are passed on to their loved ones in the most tax-efficient manner possible.
In conclusion, the inheritance tax allowance for a married couple is an important consideration for estate planning. Whether in the United Kingdom or the United States, understanding the available exemptions and credits can help minimize tax liabilities and ensure that assets are passed on to the next generation as smoothly as possible.
