What is an inheritance?
An Inheritance /ɪnˈher.ɪ.təns/ is something that a person passes on to somebody else after they die. If farmer John dies, and his daughter Susan becomes the new owner of the farm, she has inherited it. The farm is her inheritance. John bequeathed the farm to Susan. The opposite of to inherit (receive) is to bequeath (give).
Upon the passing of an individual, legal proceedings, commonly known as probate, are often required to validate the deceased’s will and to lawfully distribute the inheritance to the rightful heirs.
According to the Low Incomes Tax Reform Group:
“Inheritance tax (IHT) is basically a tax on the transfer of assets that you build up during your lifetime and then pass on to others. The passing to others might be during your lifetime, as a gift, or when you die.”
Inheritance’s root word is “inherit”
There are many words in the English language that come from the root word “inherit.” We call them derivative words. Let’s have a look at some of these derivatives and their meanings:
To receive (property, titles, or other benefits) from an ancestor or predecessor as a right or title descendible by law at the owner’s death.
Something that is or may be inherited; property passing at the owner’s death to the heir or those entitled to succeed.
A person who inherits something.
(of a trait or condition) Derived genetically from one’s parents or ancestors.
Inheriting (verb, present participle)
The process of receiving something as an inheritance.
Capable of being inherited.
In a manner that allows something to be inherited.
The state or condition of being an inheritor.
A female who inherits or is entitled to inherit, especially a woman who inherits property.
To deprive of a natural or legal right to inherit.
The act of disinheriting or the state of being disinherited.
To inherit again or anew.
We call the tax that the government charges on the estate of someone who has died inheritance tax. Estate, in this context, means the property, other possessions, and money that belonged to the person who died.
Most countries have a tax-free threshold, i.e., if the estate is worth less than a certain amount, the inheritors do not have to pay tax on it. In the USA, people may refer to the tax-free threshold as the exclusion amount.
The tax exclusion amount is much higher in the USA than in the UK. In the USA, it is $11.18 million, compared to between £325,000 and £475,000 in the UK.
Beneficiaries should also be aware of potential capital gains tax responsibilities, which apply to the profit from selling assets they have inherited, distinct from any inheritance tax paid.
People in the UK and some other Commonwealth nations also use the term death duty colloquially (but not legally). In America, people might say estate tax.
In the UK in 1894, when inheritance tax as we know it today was first introduced, it was called estate duty.
Gifts before you die
Most countries have laws regarding giving your estate or part of it to people before you die.
In the UK, for example, if you give something to your son or daughter while you are still alive and survive for at least seven more years, the inheritors won’t have to pay tax on it when you die. If you die within seven years, however, they will be liable. In the USA, tax liabilities vary from state to state.
Inheritance – vocabulary and concepts
There are many compound nouns containing the word inheritance. A compound noun is one that consists of at least two words, such as “inheritance tax.” Let’s look at seven of them, their meanings, and see how we can use them in a sentence:
Regulations governing the distribution of a deceased person’s estate.
Example: “The inheritance laws required that the estate be divided equally among the children.”
The entitlements of individuals to receive assets from the estate of a deceased relative.
Example: “She was surprised to learn about her inheritance rights as an adoptive child.”
A disagreement over the distribution of assets from a deceased person’s estate.
Example: “The siblings entered into a prolonged inheritance dispute that went to court.”
The process of arranging one’s estate and assets for ease of transfer after death.
Example: “Early inheritance planning can significantly reduce the tax burden on the beneficiaries.”
Inheritance tax return
A tax form filed to report the value of an estate for tax purposes.
Example: “The executor struggled with the complex details required for the inheritance tax return.”
A pattern of passing down assets or traits through generations.
Example: “The family’s art collection began a new inheritance cycle when it was bequeathed to the grandchildren.”
A cash payment given in anticipation of receiving assets from an inheritance.
Example: “He took an inheritance advance to cover urgent expenses before the estate was settled.”
Your Will is a document that states what your final wishes are before you die. In it, you state the names of the people and/or organizations that will inherit your estate after your death. Your estate is your property, money, shares, and other assets that you own.
Officially, this document is called your Last Will and Testament. We also call it your Testament or your last will.
Video – What is an Inheritance?
This interesting video presentation, from our sister channel on YouTube – Marketing Business Network, explains what an ‘Inheritance’ is using simple and easy-to-understand language and examples.