Widow seeks to avoid £300,000 inheritance tax bill due on a gift made by her late husband because the gift was made before they were married The widow of one of the heirs to the JD Sports fortune is applying to the Court to rescind the gift of half...
Why Make a Will?
We all know we should make a Will but it is one of those things that we never seem to get to round to doing. What’s more, it is vitally important, especially if you have the responsibility of a family or home. By not writing a Will, there can be great upset and your belongings and assets may not go to those people you intended. Having a Will in place will not take away the sense of loss or the grief of losing a loved one but a Will can significantly help the bereaved on a practical level and can minimise the inheritance tax payable. To find out more about Wills - see our Wills FAQs.
What can you expect from us?
Dawson Hart offers a cost-effective, expert, efficient and friendly Will-Writing service . At our initial meeting we will discuss all aspects of the Will including the appointment of Executors and Guardians for your children (if applicable) and your wishes as to the passing of your assets. In addition we offer inheritance tax advice if this is required. We know that discussing your Will is a sensitive matter and we pride ourselves on the personal approach to Will writing that we provide to our clients. We welcome the opportunity of working with your accountant and financial adviser when discussing your will and inheritance tax planning. It is tempting to avoid having to go and see a Solicitor to make a Will. For some writing their own Will can be very straightforward. However even a simple Will that has been prepared correctly will be invalid if not signed and witnessed correctly . So do take care.
How can we help?
There are many ways in which we can help. In particular if:
- you have been married before or have children from a previous relationship
- your circumstances and/or assets are complicated
- you wish to mitigate inheritance tax
- you have someone who is financially dependent on you
then you should seek our advice. To discuss your requirements, please contact a member of our Private Client team.
If the value of your estate exceeds the threshold (currently £325,000) applicable at the date of your death then inheritance tax may be payable.
Inheritance tax is presently charged at 40% on the value of your estate that exceeds the threshold, otherwise called the nil rate band (with some exceptions, in particular relating to agricultural and business property). There is no inheritance tax payable on assets passing to a surviving spouse or to a civil partner (unmarried couples do not benefit from such an exemption) or on assets passing to a charity. If you are unmarried or do not have a registered civil partnership then you need to consider the implications of inheritance tax on death and whether there is a need to equalise assets between you and possibly consider the use of trusts to take full advantage of both allowances. Prior to 9th October 2007 we advised married couples and civil partners to consider tax-efficient wills to mitigate the inheritance tax payable on the second death. Where assets pass to the surviving spouse or civil partner there is no inheritance tax payable on them at this time. But on the death of the surviving spouse or civil partner, their estate would have the benefit of their own nil rate band but the remainder of their estate is normally taxed at 40%. In effect the nil rate band of the first to die was wasted. Tax-efficient Wills, otherwise known as nil rate band discretionary trust Wills, had the effect of ring-fencing the allowance of the first to die, saving up to £120,000 of inheritance tax on the second death.
Transferrable Nil Rate Band
It is now possible, on the death of a surviving spouse, to transfer any unused nil rate band relating to the first deceased spouse. This applies to any death of a surviving spouse or registered civil partner on or after 9th October 2007, irrespective of when the first spouse died. This means that there is the potential to double the amount of nil rate band deducted on the death of the surviving spouse. Therefore, even if only simple Wills are in place, on the death of the surviving spouse the estate of the surviving spouse will have the benefit of inheritance tax relief on assets with a value of up to £650,000 (based on current tax allowances). If you have already put in place a nil rate band discretionary trust Will, then we would recommend that you consult us before making changes. There are many other reasons for retaining the nil rate band discretionary trust Wills that you have in place or for considering their inclusion in your Will in future.
These include preserving the assets for the children and grandchildren in the event that the surviving spouse should remarry, need nursing home care or have financial difficulties. Such trusts can also protect the interests of children who have some kind of disability or are in receipt of state benefits, when giving them the fund outright might not be in their best interest or it might affect their benefits. There is flexibility given to the Trustees of these Wills so that they have absolute discretion as to what payments are made out of the trust and to whom. If a beneficiary of the trust is having matrimonial difficulties for example, the Trustees may decide not to make any payments to them at that time. Whatever you decide to do, it is important that you consider all your options, so please contact us if you wish to discuss matters further. It is important to ensure that proper records are retained on the death of the first spouse or civil partner to enable the Personal Representatives on the second death to establish the combined allowance available at that time. We can advise you on what information and documentation will be relevant.
Residence Nil Rate Band
Since 6th April 2017 it has been possible to claim relief from inheritance tax if you leave your home to your children or grandchildren.
The relief is as follows:
It is possible for a claim to be made on the death of a surviving spouse or civil partner to transfer any unused residence nil rate band relating to the first deceased spouse or civil partner.
The rules relating to residence nil rate band are complicated and we can advise you on them as part of your Will review.