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Making your will work for you
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FINANCE ARTICLE
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The new nil band rate rules brings great news for some who are yet to make a Will.
However for many who have made their Will before the changes in law, questions have arisen as to whether it should now be updated. And for people making a first Will are the new rules the only answer or even the perfect answer?
The nil band rate now means that each person is entitled to up to £312,000 without incurring inheritance tax charges, which is charged at 40% over that threshold.
Leading Inheritance Tax expert and partner at Lane-Smith Shindler, Geoffrey Shindler advises that a Will made before the changes in law should not be updated for a number of reasons.
The double nil band rate, where a couple could be exempt from 40% tax up to £624,000, is not something that necessarily will always be available. Governments have been known to give tax breaks and then take them away again, so people should not rely on tax breaks always being there.
Geoffrey Shindler explains: “Some people think it is better to take the tax break in the first Will rather than leave it to chance that it may still be there on the second death.”
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For couples wanting to maximise the double nil rate band and not relying on the new rules setting up a Discretionary Trust in the Will is advised as the best way of doing this. On the first death of a couple, the first nil rate band can be placed into trust, which will mean that no IHT is payable. Income and capital are always at the discretion of the trustees who can benefit different people with different amounts in different years. This is a great way for the family to have access to finances yet at the same time protecting them from an IHT liability.
There are many benefits of a Discretionary Trust advises Mr Shindler: “First and foremost they allow flexibility for the surviving spouse and for their children, and reduce the IHT estate for the surviving spouse. This means that there is a reduced liability to inheritance tax payable upon death of the second spouse. In addition to this, if divorce comes into play, the children of the surviving spouse will have their inheritance protected from the new partner perhaps benefiting financially.”
There are ways of making a will work for the individual. However it can be complicated to make the savings work. Each individual case is different and must be assessed individually by a legal expert. For now, those who have made a Will, advice is to keep the Will remaining the same as it was before the new nil band rate. For those who have not yet made a Will they will have to choose between the Discretionary Trust route in the first Will or hope the current rules stay in place as the way of reducing a family’s liability to inheritance tax.
For further information and advice on Wills and Trusts, visit www.lanesmithshindler.com or contact Geoffrey Shindler on 0845 658 4848.
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