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Wills and inheritance tax planning

April 2006

Unfortunately, one certainty of life is that we will all die, but regardless of age or health, no one can say when. If you have just bought a property, or invested in a property, the value of your estate has just altered and it is important that you think about altering your Will to recognise that.

If you die without leaving a valid Will, the distribution of your possessions will be decided by the state. This may mean that your married partner may not get everything you wanted them to, an unmarried partner may not get anything and an estranged spouse may get all of your money!

A simple Will means that you can say what should happen to your personal belongings, even though you are no longer around.

Married couples and Civil Partners can also use their Wills to reduce their inheritance tax bill by up to 114,000. This means that more money can be passed to their children or families and not the government.

In England, each person is currently entitled to pass up to 285,000 of assets on death, free of tax. This is what is referred to as the “nil rate band”. In this country, assets passing between spouses or civil partners on death pass free of inheritance tax. So, when the first spouse dies everything which passes to the survivor is free of tax. When the second spouse dies, their estate will pass to their children, for example, but anything over 285,000 will be taxed at 40%. This means that the couple are only making use of one “nil rate band”, rather than the two bands that they are entitled to. Through the use of complex trusts inserted into the Wills, both bands can be used and thousands of pounds can be kept from the tax man.

Due to the increase in house prices, five out of six homes will already be over the inheritance tax limit, without even including the other assets of the estate. It may be hard to think about life time preparation, but it will be harder on those that you love if you don't. Remember, where there is a Will, there is a way!

For further information give us a call on +44 (0) 1753 486 777.