HomeNewsBusiness NewsInheritance Tax Planning – Is The Nil Rate Band Will Trust Still Relevant?

Business News

Inheritance Tax Planning – Is The Nil Rate Band Will Trust Still Relevant?

When considering inheritance tax planning, many married couples would in the past have been advised to include a Nil Rate Band Discretionary Trust in their Will. This relatively simple addition to a Will allowed married couples to use both nil rate bands and potentially save many thousands of pounds of tax. With the recent advent of the transferrable nil rate band we often get asked if this planning remains relevant.

On first sight there don’t appear to be many reasons for retaining the Nil Rate Band Will Trust but the following are some of the issues that should be considered before making changes:

Avoiding the Local Authority charge

There may be a desire to avoid assets being available to the local authority in the event of the survivor going into care. By leaving assets to a trust on the first death means that those assets will not count as part of the surviving spouse’s resources for the purposes of the local authority charge.

Expected high increase in asset value

It may be felt that investments made subject to the Will trust on the first death will increase on value at a greater rate than the nil rate band.

Using loans

Further IHT savings could be secured by the trustees of the Will trust making loans to the surviving spouse if and when funds are funds are needed. These create debts and so reduce the taxable estate of the survivor on his/her subsequent death.

Concern over widow's/widower's future re-marriage

The testator may wish to ensure that his or her assets (in this example at least to the value of the nil rate band) pass to his or her children after the death of the widow/widower.

Summary

If you would like to know more about nil rate band trusts (will trusts), stand to inherit a legacy, want to leave one or are concerned about the tax payable on your estate, you will find our Guide to Inheritance Tax useful.  Starting with a clear explanation of how Inheritance Tax is charged and covering a range of areas including applying for probate, intestacy (the implications of dying without a will) and trusts, the guide is clearly written and easy to understand. 

Please email David Higgins david@refp.co.uk for your copy, and also if you have any questions regarding your own IHT planning. This article along with many similar articles appears on our blog www.refinancialplanning.blogspot.com   

Re-Financial Planning Limited, the financial planning arm of Glazers, is authorised and regulated by the Financial Services Authority.