Giving your assets away while you are alive is a good way to reduce the inheritance tax (IHT) liability on your estate when you die. Just bear in mind that HMRC will consider gifts going back seven years prior to your death when assessing IHT. So keep a record of all gifts you make, and include the record in your Die Tidy.
Things can get a complicated if there is inheritance tax to pay, so it’s a good idea to do an annual review of your financial position. Each year, at about the same time, add up the values of all your bank accounts, investments, life assurance policies, and property (including your house and car). Don’t forget the less obvious things like any death in service benefit that your employer may provide. Then subtract any liabilities such as outstanding mortgage, loans and credit card balances. The remaining amount is the gross value of your assets at that point in time. Your executor will need to confirm the correct figures at the date of death, but the latest annual review figure will hopefully give them a good idea whether inheritance tax is likely to be due or not. Put an updated copy of your annual review in the Die Tidy file each year, or note saying where it can be found.
This is what you should put in your Die Tidy, and why:
Item | Reason to include |
Will | Include your will if you have one, or include a note saying where it can be found. If you don't have a will, or if it can't be found, the rules of intestacy will govern the distribution of your assets. This may not match your wishes. |
Expression of Wishes | An expression of wishes is not legally binding, but can guide people in things like: who to inform of your death, funeral arrangements, whether you want a religious or non-religious service, whether you wish your body to be buried or cremated. |
Certificates | Include your birth certificate, marriage certificate, certificate of divorce (decree absolute), and other similar certificates. The information from these maybe needed for the various forms that will be completed after you die (such as for the death certificate and inheritance tax forms). |
Driving Licence and Passport | These will need to be returned to the issuing authority for cancellation. |
Vehicle Registration | When you die, any vehicles you own will become unregistered. These will need to be registered to another keeper - probably your personal representative until the vehicles are sold for transferred to beneficiaries. |
Annual Review | This will give your personal representative a head-start in valuing your estate for probate. |
List of Assets and Liabilities | Your personal representative will need to contact all the organisations with you have assets (credit accounts) and liabilities (loans, credit cards). You will need to provide a list of these with the respective account numbers. |
When you die, someone will need to find your important information and documents quickly. A good solution is to create a Die Tidy file. This is a colourful foolscap box file (for example bright yellow) with the words “Die Tidy” in big letters on the label. It needs to stand out for a reason – to save your relatives turning your home upside down looking for information after you’ve gone! This box file should contain all the important documents that will be needed to deal with your assets and liabilities.
See here for more details of what you should include and why.