Life can sometimes throw up a pleasant surprise, such as a lottery win or an unexpected inheritance. You could also find yourself receiving a large sum in the form of compensation.

‘While such a cash injection is usually life-changing for the better, after the excitement has subsided, it is important to look at some careful tax planning, as well as the possible need for notarial services if your new-found wealth involves interests abroad,’ as Matthew Cooper, a Partner in the Private Client team at WBW Solicitors in Paignton explains.

Inheritance tax planning

There are several things you can do during your lifetime, and via your will, to legally minimise the inheritance tax bill – a one-off tax normally payable when you die on any cash, property, investments and assets you own worth more than £325,000. No inheritance tax is payable on your estate if the total assets are worth less than £325,000 (the nil-rate band), and this threshold can increase to £500,000 if you leave your home to your children or grandchildren in your will.

There is no inheritance tax liability at all if you die first and leave your assets – whatever their worth – to your spouse, civil partner, a charity, or a community amateur sports club in your will. Aside from this, anything you leave above the nil-rate band is usually charged at 40 per cent, although this charge can be reduced to 36 per cent on some assets if you leave 10 per cent or more of the net value to a charity in your will.

Lifetime gift-giving is another good way of reducing your inheritance tax bill: any of your possessions that you give away during your lifetime, worth up to a total of £325,000, will not be subject to inheritance tax. Gifts you give over this threshold will also be inheritance tax-free if you live more than seven years after the gift was given. If you die within seven years of the gift, inheritance tax will be charged on a tapering basis depending on when the gift was given before you passed away.

On top of this, you can:

• take advantage of an annual exemption, which lets you gift cash or assets worth up to £3,000 per annum without any inheritance tax liability. The gift can be given to one person or split between several. Any leftover allowance can be carried over to subsequent tax years, up to a maximum of £6,000;
• gift any surplus income you might have tax-free, although you will have to prove to HM Revenue & Customs that you can still maintain your usual standard of living after doing so;
• give away as many gifts of up to £250 per person as you like during each tax year, provided you have not used another exemption on that individual;
• treat anyone you choose to a wedding or civil ceremony gift worth up to £1,000 in the same tax year (£2,500 for a grandchild or great-grandchild, £5,000 for a child); and
• donate any amount to charity without incurring inheritance tax.

Notary services

Should you wish to invest some of your new riches in property or other interests abroad, you may need to engage the services of a notary public – a special type of lawyer whose qualifications are recognised internationally.

A notary can prepare, certify or witness documents required for overseas interests, such as property papers, powers of attorney, sworn statements and contracts. Documents witnessed by a UK notary are generally recognised and accepted in most parts of the world.

You would need a notary, for example, if you bought a property abroad in a jurisdiction which requires both the buyer and seller to be personally present at the finalisation of the sale, but you are unable to attend. A notary could organise a power of attorney which would enable you to choose and appoint your own lawyer in the overseas country to take your place through the transaction.

How our solicitors and notaries can help

If you have come into unexpected money and want to invest abroad or reduce the amount of inheritance tax your loved ones will have to pay after you pass away then our private client legal team is here to assist.

Our wills and trusts specialists can help you draft a will which reflects your wishes while minimising inheritance tax liability. They will also guide you through the complex rules governing lifetime gifts to ensure everything is legal, while again keeping inheritance tax liability to a minimum.

Our notaries, meanwhile, will always be at your service if you need legal assistance with any overseas documentation.

For more information on inheritance tax, notary services, or any other private client issue, contact Matthew Cooper at WBW Solicitors in Paignton on 01803 546104 or email matthewcooper@wbw.co.uk.

WBW Solicitors has offices in Axminster, Bovey Tracey, Brixham, Chard, Exeter, Exmouth, Honiton, Launceston, Newton Abbot, Paignton, Seaton, Sidmouth, and Torquay.

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.