Death is something most of us would rather not think about and maybe this is why over sixty percent of the population of this country depart this life without ever having made a Will.
"It is too expensive", or "everything I own will automatically pass to my spouse or my children" or "my assets are too insignificant".
In the event of your unfortunate demise, without having made a Will the "Intestacy Rules" apply in a rather arbitrary manner, particularly if you do not have any children. This may lead to your loving and faithful spouse having to share your estate with "unseemly" relatives whom you certainly never intended to benefit.
TRANSFERABLE NIL RATE BAND
Under current legislation, each individual is entitled to an Inheritance Tax Exemption of £325,000 (2010/2011)
. If, for example a husband (or civil partner)left his entire estate to his wife (or civil partner) outright, and then subsequently died, his exemption (nil rate band) would not be used . Under the new rules announced on the 9th October 2007 the unused nil rate band of the first spouse to die can now be transferred to the survivor's estate. However, in the event that you wish to protect at least the nil rate band value for beneficiaries other than the surviving spouse, the new rules will not assist you.
UNMARRIED COUPLES:
If you are a couple who are not married or in a civil partnership, nothing has changed. You can still make an IHT savings by making discretionary trust wills to the value of the nil rate band in each of your Wills.
If one of you dies and passes his or her estate to the other, the first estate will attract IHT at 40% on all assets over the threshold £325,000 (2009/2010)
. What is left after debts and taxes passes to the survivor and will be taxed again at 40% when the second partner dies (assuming the second partner's estate exceeds the IHT threshold).
SOLUTION:
A pair of Discretionary Trust wills can protect a part of the estate for the benefit of your eventual heirs and ensure that IHT is only paid once. We advise that if you are in such a relationship and your joint assets exceed £325,000 (2009/2010) then the nil rate band trust route may protect you now and in the future regarding whatever legislation is thrown at you.
Couples of second marriages or civil partnerships or a combination of both:
You may have children from a previous marriage and you may wish to preserve at least the value of the nil rate band for your respective children. An ideal way of dealing with this is to include a nil rate band discretionary trust in your
Will.
As can be seen, there are many reasons why a nil rate band should be included in one's Will for IHT purposes or to prevent the entire estate aggregating with the survivor's estate. Come and talk to us. We have many options available for different circumstances.
Please note: The above arrangement will prevent a transfer of the unused nil rate band allowance to the surviving spouse's estate.
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