WILLS AND INHERITANCE TAX PLANNING

When a person dies, the value of their estate will benefit from a Nil Rate Band for IHT purposes. It is only the element of their estate that exceeds the Nil Rate Band that is subject to IHT.

For a married couple, the traditional format of Wills is for everything on the first death to be left to the survivor. Regrettably this means that the Nil Rate Band for the first to die is squandered.

Now that house prices are so high, many more couples have joint estates that exceed the Nil Rate Band.

An attractive feature in revised Wills would therefore be a Nil Rate Band discretionary trust, whereby the Nil Rate Band (or a significant part of it) can be used up on the first death, as well as the second. The survivor can be a trustee and / or beneficiary of the discretionary trust.

The traditional format of property ownership for married couples is joint tenancy, however on first death, the survivor would automatically inherit the whole property. To allow more flexibility, it can be helpful if the basis of ownership is changed to tenants in common, whereby each has a 50% share in the property, which will go into their estate on death.

For all persons (not just married couples), other IHT planning alternatives include:

• making gifts out of capital of up to £3,000 per annum

• making gifts of a more substantial nature, either to a person, or a trust, and then surviving 7 years thereafter

• making regular gifts out of your income (you need to have spare income to start with)

• investments into business property assets for 2 years or more (typically this is unquoted / AIM listed shares which attract a high degree of investment risk)

Whilst not directly related to Wills and IHT planning, serious consideration should also be given to the establishment of Enduring Powers of Attorney. This is very cheap to do, and will save a lot of money in the event that you become unable to manage your affairs.

For specific advice tailored to your own circumstances, we recommend that you seek independent financial planning advice and that you consult a solicitor for advice on drafting Wills and trusts and Enduring Powers of Attorney.

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