Kent Solicitors

Inheritance Tax ("IHT")

As you know, IHT does not "bite" on assets left to a spouse nor the first #300,000 - the nil rate band ("NRB") - of a deceased persons estate, but is then levied at 40%

Many wills ("Old Wills") therefore left the NRB down a generation - to use up the NRB and not "waste" it - saving #300,000 x 40% = #120,000 IHT

Often a discretionary trust ("DT") was involved and sometimes, where the wealth was tied up in a house, an IOU

The Chancellor has now announced that if a married person dies, without using up all the NRB and leaving everything to the surviving spouse, the unused NRB is transferred to the latter ("the Relaxation")

This means that if the Deceased gave away nothing in the 7 years before death (other than minor gifts and gifts out of income) the surviving spouse has a NRB of #600,000

Should you now change your Old Will? Think before you act!

The Relaxation may not become law. It needs to be incorporated in a Finance Act first. If an election is called and another party gets in, they may have different ideas altogether

Even if this is not the case, consider why you gifted the NRB or created the DT in the first place. Was it just to save IHT or was it to get money down to children at this time. If the latter, has anything changed?

Were / Are you worried that your surviving spouse might be left short of money for nursing home and medical fees or general living expenses?

If there was a DT, could the trustees benefit your surviving spouse under it? If so, is there any rush to change anything?

If you change your Will now, the change does not come about and you die, you have just given #120,000 to the taxman

Labels: inheritance tax death