Q. I drafted my Will before the Government changed the Inheritance Tax allowances for married couples, do I need to change anything?
A. Prior to October 2007, if a person transferred their whole Estate to their spouse on their death their tax-free personal allowance for Inheritance Tax (now £325,000) was wasted. This often meant that, for couples with a combined Estate that exceeded the Inheritance Tax threshold, the Estate was subject to inheritance on second death. In many instances this could have been avoided.
To preserve the tax free allowances for the married couple, it was good practice to include a trust in each Will to capture and “preserve” the tax free allowance on first death. Often, the trust was framed to benefit the surviving spouse if he or she needed the assets within it. Such trusts were often referred to as Nil Rate Band Discretionary Trusts.
In October 2007, the Government introduced legislation that automatically preserves the personal allowances of a married couple (or those in a Civil Partnership). On death, if a person passes their whole estate to their spouse or civil partner their “unused” personal allowance transfers to the survivor. On second death, the survivor’s estate can then benefit from the transferred allowance. This is now known as the “transferable nil rate allowance”.
Although these legislative changes were significant, our advice is not to simply remove the Nil Rate Band Discretionary Trusts from your Wills without proper consideration. There are a number of uses for these trusts as they are inherently flexible and assist many families with the controlled distribution of their assets and wealth for generations. Not only this, they can easily be wound up if they would not serve a purpose.
If you think you need to make changes to your Will, always seek appropriate advice. There may not be any reason to incur further costs if what you have would still meet your requirements.
Contact us about our Inheritance & Welfare Team who can advise you today.
Please call 0800 916 9055, or email firstname.lastname@example.org. Our Wills and probate specialists operate across the country and can offer immediate and accessible representation anywhere in the UK.