Inheritance Tax Mitigation
Inheritance Tax (IHT) has been the biggest tax hot potato of the last couple of years Barely a week goes by without the Sunday papers talking about it, it wasn’t long ago that The Daily Express ran an “Inheritance tax is theft” campaign, and even former DTI minister Stephen Byers called on the former Chancellor Gordon Brown to abolish it. What is clear is that IHT is here to stay, and that more and more people (even quite “ordinary” people) are being caught in its net because of rising property prices.
The 2007 Pre-Budget brought in welcome changes for married couples and civil partners by allowing them to transfer unused Nil Rate Inheritance Tax Bands from the first death. Whilst this may have reduced the attractiveness of Nil Rate Tax Band Wills for many couples, they are still worth considering, especially where the estate is to be protected in Trust or the couple wish to ensure the Nil Rate Band is fully used on first death through concerns about the legislation changing.
The alternative is to ensure that the Nil Rate Band is not used on first death, thereby allowing it to pass to the survivor and be used on their death. Should the surviving spouse not pass away for another few years then, by not using the Nil Rate Band on first death, they will be entitled to a maximum number of 2 Nil Rate Bands on their death at the levels prevailing at that time. Hence greater Inheritance Tax savings may be made by not using the Nil Rate Tax Band on first death.
In order for married couples or civil partners to make sure this happens then they need a tax efficient Will. They can not rely on the laws of Intestacy (Register on our Contact Us Page for a FREE Intestacy Helpsheet).
Tax efficient Wills for married couples and civil partners now include:
1. Simple Wills leaving everything to the surviving spouse.
2. Wills leaving everything in “Immediate Post Death Interest Trust” (see section 3.11 of our Trusts helpsheet) for the surviving spouse, to protect the estate from being diluted by subsequent marriages etc.
3. Nil Rate Band Discretionary Wills in certain cases. (see section 3 of Wills helpsheet)
Whilst having tax efficient Wills is likely to save couples thousands in Inheritance Tax, it is very difficult to generalise the potential tax savings as everyone’s circumstances will be different. For example, if the Nil Rate Band is fully utilised on first death in the current tax year (2008/09) and the remaining spouse passes away in 2010/11, then based upon the proposed increase in the Nil Rate Band to £350,000, then an extra £15,200 in Inheritance Tax could be payable on their estates unnecessarily.
Clearly the amounts involved will often make this a very attractive piece of tax planning. What’s more, it is a piece of tax planning that can potentially apply to millions of people.
The cost of preparing the IHT Health Check is normally £ 1000 + VAT BUT for a limited time only we will prepare this for £ 750+ VAT. If you are not 100% happy with the final Report pay us nothing.