Top of the to do list for many individuals is to make or update their will. Many think this is something to leave until later in life but it is important to get things in place once a property is acquired or when children come along.
In the absence of a will, there are statutory rules which dictate how your assets are distributed on death. Those statutory intestacy rules may not be tax efficient and you might want to make specific provision in your Will for your unmarried partner or for the guardianship of your children.
Passing On The Family Home
One recent change that should be taken into consideration when drafting your Will is the additional Inheritance Tax (IHT) nil rate band for passing on the family home to direct descendants on death. We can work with your solicitor to make sure your Will is tax efficient.
Now that the additional relief is fully phased in it provides an extra £175,000 on top of to the normal £325,000 nil rate band. Where the allowance is unused on the death of the first spouse, the unused allowance is available on the death of the surviving spouse. This potentially allows a married couple (or civil partners) to potentially pass on assets of up to £1 million without paying IHT.
This additional relief is, however, restricted if your assets exceed £2 million. The rules are fairly complicated but we can review your personal circumstances to ensure that you take advantage of all the relief that you are entitled to.
This relief is even available when you downsize to a smaller property.
For example, if a married couple currently lives in a large house worth £500,000 downsize to a flat worth £300,000, they could give away some of the proceeds during their lifetime and yet still benefit from inheritance tax relief based on the higher valued property.
They could even sell up completely and move into a rental property or a care home and still get the inheritance tax relief! If you have any questions on this or wish to look at your will, please contact us.
January 13th, 2021