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 at the rate of 40%.

For married couples or civil partnerships, any unused nil rate band on the first death can be carried forward and added to the nil rate band on the death of the survivor.

It used to be that the nil rate band on the first death was lost unless a discretionary Will trust was employed to make use of it. A discretionary Will trust on the first death can still be useful, particularly where the survivor subsequently goes into care as the value of the estate can be substantially diminished by care costs.

IHT planning is most relevant for individuals whose estate exceeds the nil rate band, and couples whose combined estate exceeds twice the nil rate band.

IHT planning can include:

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

• making capital 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 have a high degree of investment risk)

• making gifts to charity

• placing existing life assurance and pension policy death benefits under trust so they do not inflate your estate on death

Whatever the size of your estate, a Will is important as it is the only means by which you can be sure your wishes will be followed (otherwise the Rules of Intestacy will apply).

Whilst not directly related to Wills and IHT planning, serious consideration should also be given to the establishment of Lasting Powers of Attorney. This 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 Lasting Powers of Attorney.

For details of our Financial Planning Service click here.