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Inheritance Tax: Why it is important to regularly review your Will One of George Osborne’s last acts in the budget of 2015 was a raft of changes regarding the laws relating to Inheritance Tax. The headlines were that you could now claim up to £1,000,000 before you had to pay Inheritance Tax. The law as it stands allows everyone a tax free allowance (Nil Rate Band) on death of £325,000 or couples can use what is called the Transferable Nil Rate Band to claim up to £650,000 in certain circumstances. The new law adds to this amount if there is a family home in the person’s estate and by 2021 we should be in a position where a couple can have up to a £1 million tax free allowance. However, as often is the case with new legislation, the bold headlines proclaiming tax cuts mask the fact that things are not as straightforward as they may seem. Firstly, the new extra allowance only applies if you have direct offspring and therefore for instance if you do not have children you will be limited at the figure of £325,000 for your Nil Rate Band (or of course £650,000 for couples). Secondly - and as this the main point I wish to raise in this piece - we at Tilly Bailey & Irvine believe that the new law could have quite a disastrous effect on Wills and Estate planning that people may have already done some years ago. To illustrate the point it is important to go back to demonstrate what people were doing before the Transferable Nil Rate Band became available. With clever planning it was always possible to make use of a Nil Rate
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Andrew Steel is a Wills and Probate lawyer specialising in Inheritance Tax, Estate Planning, Power of Attorney, Trusts & Wills. Band from each member of a couple. What clients did was to leave their Nil Rate Band into what was called a Nil Rate Band Discretionary Trust thus preserving the Nil Rate Band of the first to die. Although such Wills have not been necessary for Inheritance Tax Planning for some time it was our view that clients with such Wills in place did not need to make changes to them as there were still various positive effects of the Discretionary Trust and also they are relatively easy to dismantle if they proved to be unnecessary or cumbersome. As mentioned above however this new Family Home element of the new law is only available if you gift the house to direct descendants. A Discretionary Trust is not therefore a gift to descendants and thus does not qualify for the new relief. Therefore we are advising anybody who has an Inheritance Tax problem to visit us for some advice even – and perhaps especially – if you have made Wills previously.
Tilly Bailey & Irvine Law Firm, 12 Evolution, Wynyard Park, TS22 5TB T: 0800 052 6824 www.tbilaw.co.uk Find us on Twitter @tbilaw
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LIFE GUIDE JANUARY/FEBRUARY 17