Wills and Inheritance Tax

Writing a Will and keeping it up to date is an essential activity which enables you to specify how your assets should be distributed after your death. In the Will you can name your executors and guardians to your children. If you die without having a Will in place you are deemed to have died "intestate" which means that your assets will be distributed in line with a set of rules over which you have no control whatsoever.

So it goes without question that everyone should seriously consider writing a Will.

In addition to the basic management and distribution of assets, the use of Wills and Trusts can be a very effective vehicle for avoiding or reducing liability for Inheritance Tax (IHT).

The announcement by the Chancellor of the introduction of transferable Nil Rate Bands (NRBs) between spouses and those in civil partnerships on October 9th 2007 has reduced the need for particular types of Trusts which are designed to fully utilise both individual NRBs. There are still certain benefits in creating Will Trusts for married couples and civil partners and IHT is still an issue that should be planned for in your Will. Please contact us to discuss your particular requirements in more detail.

However, the situation regarding un-married couples has not changed. Significant savings in IHT can be made through the use of Trusts designed to utilise both individual NRBs.

In the notional example shown below, Mr Jackson and Ms Jones, an un-married couple not in a civil partnership, have drawn up their Wills and have included in them clauses which state that on the death of the first party, an amount equal to the current Nil Rate Band (NRB) should be paid into a Trust. This will not be liable for Inheritance Tax as it falls within the NRB. An additional clause also states that the surviving partner will not own the asset but can take some income or benefit from it.

When the surviving partner dies, they too will be able to leave assets up to the NRB threshold without an IHT liability, so both individuals will be able to use the maximum available NRB available.

This method is not only effective for passing on cash and other tangible assets but can also provide for the passing on of your property.

Here is an example of how this could work in practice:

 

Mr Jackson and Ms Jones each have individual assets of £312,000.

 

 
Writing your Will is a specialist activity which is usually carried out by specialist Will writers or Solicitors. We will work closely with your chosen Will writer (we can of course recommend such experts to you) to ensure that your Will includes in it all of the relevant terms necessary to reduce or avoid as much liability for Inheritance Tax as possible.

If you would like to speak to an adviser about reducing your IHT liability or arrange a no commitment consultation then contact us on 0845 0532965 or alternatively please use the Contact Us form.