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Is it something I need to worry about?

Matthew was devastated when Alina died

"We knew it was going to happen, she had been diagnosed with cancer the year before. She was a very practical woman and she made sure her will was up-to-date, and re-filed all her papers so that I would be able to find everything.

We tried to prepare ourselves for what would happen. She told me what she wanted to me to do after she had died. She even wrote out what songs she wanted at her funeral. It may sound a bit cold but it wasn't, it was just her way of coping and of trying to help me cope.

When I started trying to sort out her affairs, I was shocked. Before I can even start, I have to pay a huge inheritance tax bill. I don't know how I can find the money. I don't want to have to sell our home. We've been here for 16 years and we spent so long decorating and making it ours. It's where all my best memories are, and it's our children's home."

It may be. Inheritance Tax is charged on any estate worth over £325,000 (for 2010-11 and frozen at this level until 5 April 2015). This is the 'nil rate band'. Add up everything you own, including your share of the things you own jointly with your partner, and subtract everything that you owe, including your mortgage and things like loans, credit card bills, etc. If what’s left comes to over £325,000 you do need to be thinking about it.

You may have to sell your home

How bad is it?

It’s fair to say it can be a pretty painful bill to land on your doormat. When you die, anything over the nil rate band gets taxed at a rate of 40%. This can take a significant bite out of the amount you leave, which is not so bad if you’re leaving your money to a grown-up child or friend; but if it’s your partner, it can have drastic effects. It can sometimes mean they have to sell the home you’ve made together.

The good news is that, with a little tax planning, you can reduce the amount or even avoid a bill altogether.

April 2010

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