You are here: Home > News & events > Law Updates > Law Update on Inheritance Tax and Wills following the Pre-Budget Report October 2007

Law Update on Inheritance Tax and Wills following the Pre-Budget Report October 2007

01 November 2007

With all the press coverage of Mr Darling’s first Pre-Budget Report in October, one could not have missed the changes announced to Inheritance Tax (IHT).

Whilst the current nil-rate band allowance remains unchanged at £300,000 per individual, any unused allowance will now be transferable between spouses and civil partners. However, it will not necessarily mean the survivor gets a double allowance - it depends what happens on the first death.

For example, Jack, who died in 2002, left his estate of £250,000 (equal to his nil rate band allowance) to his wife, Jill. Jill dies in 2010, when the allowance is £350,000. The allowance available on her death will be £700,000.

If instead Jack had divided his estate equally between his daughter and Jill, Jill’s allowance on her death in 2010 will only benefit from an additional 50% allowance, bringing it to £525,000.

Where does this leave us with nil-rate discretionary trust Wills? The new rules seem to put married couples with simple and IHT efficient Wills on a similar footing for IHT.

However, the trust, being very flexible in structure, can provide other benefits, for example protecting assets from being exhausted on nursing fees, preserving wealth for your children, and providing a good tax planning vehicle for future generations. It can also save IHT for the families of unmarried couples.

What should you do now?

We do not consider that those people with IHT efficient Wills necessarily need to change them, although a review is recommended. Those who would have contemplated IHT efficient Wills prior to 9 October 2007 should not ignore the other opportunities that trusts can provide.

If your spouse/civil partner has died, you should retain all information about the estate. For example, keep a note of the estate value, any gifts made in the seven years prior to death and a copy of the death certificate. Your executors are now likely to need this information to make sure you get the right nil rate band allowance on your death.

If your spouse or civil partner has died within the past two years having left an IHT efficient Will it is very important to review the relative benefits of keeping or dispensing with any discretionary trust that may have arisen under that Will. Failure to act might mean that an unnecessary amount of inheritance tax is payable on your death

For more information please contact Harvey Barrett, Partner.
 

‹ Back

Quick contact

Press Office

For all media enquiries contact Edwards Harvey Associates on 01622 604600 or email enquiries@edwardsharvey.com

Furley Page Solicitors in Kent, London, Canterbury, Chatham & Whitstable
Get in touch on 0845 603 10 57