Inheritance Tax Planning (IHT)

Many people still believe that IHT is only paid by the very wealthy. Sadly, often due to huge rises in property prices over the recent past, this is no longer the case. All too often families only discover that they have a problem when a substantial bill from the taxman lands on their doormat. Everything in an estate is considered for IHT purposes, from the property, to bank holdings, to furnishings. It is often considered that, with couples, if an item is jointly owned it is not considered. This is not the case; in fact an item’s value is proportioned and added to the value of the individual’s estate.

The Pre-budget report, which came into effect in October 2007, states that married couples and widowers inherit the exemption from their spouse or deceased spouse thus they are extended twice the Nil Rate band allowance (currently £325,000.) This movement also took into consideration, civil partnerships which are also extended this exemption. This does not mean that IHT is a problem which has disappeared. For unmarried couples, Nil Rate Band Wills will still be appropriate for IHT purposes When the first of the couple dies there is no surviving spouse exemption and accordingly, the first client's Nil Rate Band must be used on the first death, if all his money becomes her money then on her death she only has a single exemption and if her estate is above the single Nil Rate Band allowance then there will be Inheritance Tax payable.

By using a special Nil Rate Band Will, we can implement a Trust on the first death to hold that share of estate for the benefit of the surviving partner but as it is not in the surviving partner’s name, it is not considered for IHT purposes.

We strongly suggest that any IHT planning should also involve taking advice from a financial adviser at the same time as looking at the legal aspects, and we welcome the opportunity to either work with your existing adviser or if necessary, we can provide one for a no obligation consultation.