Most people know roughly what their home is worth. Far fewer know how much of it their family would actually inherit if they passed away.
For many people, their home is their biggest asset. Add savings, investments and perhaps another property, and an estate can be worth considerably more than they realise.
But the value of your estate isn’t necessarily the amount your family will receive.
Inheritance Tax, mortgages, debts, exemptions and who you leave your estate to can all affect the final amount.
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What is Inheritance Tax?
Inheritance Tax is a tax that can apply to the value of a person’s estate when they die.
The estate can include things such as:
- Your home
- Other properties
- Savings
- Investments
- Shares
- Certain other assets
There are tax-free allowances available, meaning not every estate will have to pay Inheritance Tax.
However, understanding which allowances apply to you is important because your circumstances can make a significant difference.
Your family situation matters
One of the biggest factors can be whether you are married or in a civil partnership.
The rules can be different for married couples and civil partners compared with someone who is single, widowed or divorced.
Who you leave your estate to can also matter.
For example, there are circumstances in which leaving a qualifying home to children or other direct descendants can affect the amount of tax that may be due.
This is why simply knowing the value of your house isn’t enough to work out what your family might eventually receive.
Your home isn't the whole picture
Imagine someone owns a home worth £600,000.
It would be easy to look at that figure and think:
"My family will inherit £600,000."
But that isn’t necessarily the case.
You also need to consider whether there is a mortgage outstanding, whether the person has savings or investments, whether they own other property and who their estate is being left to.
Someone with a £600,000 home could therefore have a very different estate from another person with a £600,000 home.
What about a second property?
If you own another property, such as a holiday home or buy-to-let property, this can form part of your estate too.
For example:
Main home: £600,000
Second property: £250,000
That is already £850,000 of property before considering savings, investments or other assets.
Any outstanding mortgages or qualifying debts also need to be considered when looking at the overall estate.
What about savings?
Your estate isn’t just your property.
Savings, investments and other financial assets can also form part of your estate.
Someone with a £500,000 home and £200,000 in savings has a very different estate from someone with a £500,000 home and very little else.
This is why working out your potential Inheritance Tax position requires looking at your overall circumstances rather than simply looking at the value of your home.
Your Will is important too
A Will allows you to set out who you want to benefit from your estate.
Without a valid Will, your estate may be distributed according to the rules of intestacy rather than according to your wishes.
Even if you already have a Will, it is worth checking that it still reflects your current circumstances.
Your family situation, assets and wishes can change over time.
So how much would your family actually inherit?
This is the question many people have never asked themselves.
You might know:
“My house is worth around £500,000.”
But do you know:
“If I died, approximately how much would my family actually receive?”
The answer isn’t always obvious.
It depends on your circumstances, your assets, who inherits your estate and the allowances and exemptions that may apply.
And that’s why we’ve created our Inheritance & Estate Check.
Find out where you stand
We’ve created a short questionnaire that asks you some straightforward questions about your circumstances.
You’ll be asked about things such as:
- Your relationship status
- The value of your main home
- Any other property you own
- Outstanding mortgages
- Savings and investments
- Whether you have a Will
- Who you expect to inherit your estate
You don’t need to provide exact figures for everything. Your best estimate is enough.
Take the free Inheritance & Estate Check
It only takes a couple of minutes and can give you a useful indication of how your estate could look and whether Inheritance Tax may be something worth looking into.
Important: This check is for general information only and is not a calculation of your actual Inheritance Tax liability or financial or legal advice. Your individual position can depend on a number of factors, and professional advice should be obtained before making decisions about your estate.
