Update on the Inheritance Tax regime and “Will for Free” Scheme
The changes in Inheritance Tax (IHT) announced in the October pre-budget report recognised that many people, of modest means, were falling into a tax regime originally designed to affect only the rich.
The changes – hailed widely as a ‘doubling of the IHT nil rate band’ – were seized upon with great enthusiasm. On closer inspection, however, there seems less to cheer about than was first thought.
Firstly, the IHT nil rate band will not be doubled, except in cases in which two spouses or civil partners die in the same tax year. In other cases, the amount available on the second death will be the amount of the IHT nil rate band in the tax year in which the second death occurs plus an amount calculated on the proportion, if any, of the IHT nil rate band which was not used up on the first death.
The first problem arising here is that unless past records have been retained, it might be difficult to know what the value of the earlier estate was and hence the value of the unused nil rate band. This would be especially so if the value of the estate was low enough to make the filing of an Inheritance Tax Return unnecessary. Also, where the IHT nil rate band was largely used up on the first death (and the nil rate band amounts were much lower in the middling past) the ‘extra’ relief could be rather small. In any circumstances, the maximum nil band available on the second death is twice the single nil rate band.
Secondly, the new limits will apply only to spouses and civil partners. Cohabiting couples (presumably because a review of the law relating to them is ongoing) obtain no benefit from these proposals and no nil rate band is transferred between them. Indeed, they will not even inherit each other’s estates unless they have wills.
We at Waters & Co. are concernrd that people will seize on the IHT changes as a reason for neither making a will nor undertaking planning to preserve family wealth and will, unnecessarily, end up transferring assets to the State, rather than their family.
Everyone should make a Will, for the avoidance of any doubt, and to ensure that loved ones are not left with problems. It is extremely difficult for a person to challenge a Will prepared by a Solicitor. This is not the case in respect of a home made Will or a Will written by Will Writers and they can often also fail for uncertainty. Waters & Co., has experienced many home made Wills which have failed and have been the cause of enormous family disharmony. A recent case involved a home made Will which failed because the two witnesses had not actually been present together when the lady signed it!
Waters & Co., is participating in The Institute of Cancer Research Will for Free scheme which is open to those aged 50 or over (it does not involve the cost of tax planning schemes). If you do not have a Will and qualify please telephone Teresa Waters at Waters & Co. on 01675 463855 for an appointment.
The information contained in this article was prepared in February 2008 and is intended for general guidance only. It provides information in a concise form and is not a substitute for obtaining legal advice. If you would like advice specific to your circumstances, please arrange for an appointment to discuss.
The changes – hailed widely as a ‘doubling of the IHT nil rate band’ – were seized upon with great enthusiasm. On closer inspection, however, there seems less to cheer about than was first thought.
Firstly, the IHT nil rate band will not be doubled, except in cases in which two spouses or civil partners die in the same tax year. In other cases, the amount available on the second death will be the amount of the IHT nil rate band in the tax year in which the second death occurs plus an amount calculated on the proportion, if any, of the IHT nil rate band which was not used up on the first death.
The first problem arising here is that unless past records have been retained, it might be difficult to know what the value of the earlier estate was and hence the value of the unused nil rate band. This would be especially so if the value of the estate was low enough to make the filing of an Inheritance Tax Return unnecessary. Also, where the IHT nil rate band was largely used up on the first death (and the nil rate band amounts were much lower in the middling past) the ‘extra’ relief could be rather small. In any circumstances, the maximum nil band available on the second death is twice the single nil rate band.
Secondly, the new limits will apply only to spouses and civil partners. Cohabiting couples (presumably because a review of the law relating to them is ongoing) obtain no benefit from these proposals and no nil rate band is transferred between them. Indeed, they will not even inherit each other’s estates unless they have wills.
We at Waters & Co. are concernrd that people will seize on the IHT changes as a reason for neither making a will nor undertaking planning to preserve family wealth and will, unnecessarily, end up transferring assets to the State, rather than their family.
Everyone should make a Will, for the avoidance of any doubt, and to ensure that loved ones are not left with problems. It is extremely difficult for a person to challenge a Will prepared by a Solicitor. This is not the case in respect of a home made Will or a Will written by Will Writers and they can often also fail for uncertainty. Waters & Co., has experienced many home made Wills which have failed and have been the cause of enormous family disharmony. A recent case involved a home made Will which failed because the two witnesses had not actually been present together when the lady signed it!
Waters & Co., is participating in The Institute of Cancer Research Will for Free scheme which is open to those aged 50 or over (it does not involve the cost of tax planning schemes). If you do not have a Will and qualify please telephone Teresa Waters at Waters & Co. on 01675 463855 for an appointment.
The information contained in this article was prepared in February 2008 and is intended for general guidance only. It provides information in a concise form and is not a substitute for obtaining legal advice. If you would like advice specific to your circumstances, please arrange for an appointment to discuss.
