Are you a couple with Wills written before October 2007? Wills and estates
You may have to pay up to £140,000 more Inheritance Tax and now is the time to seek specialist legal advice
A new Inheritance Tax (IHT) relief called the Residence Nil Rate Band (RNRB) came into force last year. Under the Government’s current plans this additional relief will increase each year and by 2020/21 married couples or civil partners may be able to pass combined assets of up to £1,000,000 to their children without paying any IHT.
This comes at a time when IHT receipts are at a record high and the number of estates liable to tax continues to rise. During the 2017/18 tax year IHT paid in the UK totalled £5.2bn, a rise of 8% year on year and the highest figure on record. Although the introduction of the RNRB means that future IHT receipts should be dropping, many people are not taking advantage of the new allowances as they are extremely complex and they may not even be aware they exist.
To benefit from the RNRB a qualifying residence must pass on to direct descendants such as children and grandchildren, as passing on the residence to other relatives – such as siblings – means that the additional allowance will not apply. In addition, many thousands of Wills written before October 2007 contained Discretionary Nil-Rate Band Trusts, purely for tax planning reasons. Since then the law concerning IHT has changed meaning this type of Will trust is often redundant or, if no action is taken, could lead to added complications. Crucially, these trusts will not automatically qualify for the new RNRB and as a result far more tax, potentially up to £140,000, may have to be paid unnecessarily.
The law governing IHT is complex so families should invest in getting the appropriate professional advice on what legitimate steps they can take to minimise their exposure to IHT. Taking action now could save enormous sums of money in the long term.
Thursfields Legal Limited is authorised and regulated by the Solicitors Regulation Authority and our expert team includes members of the Society of Trust & Estate Practitioners (STEP) and Solicitors for the Elderly (SFE).
For more information please contact our specialist Edward Jones on 0121 624 4000 or email ejones@thursfields.co.uk
