In his pre-budget report on 9th October 2007, the Chancellor announced that the law would be changed so that a married couple, or a couple in a Civil Partnership, would in future be given a double Inheritance Tax allowance rather than each spouse or partner having a single allowance. Previously, couples who had each wanted to make full use of their personal allowance or “nil rate band” had been forced to consider making Wills containing complex discretionary trusts. Now there will usually be no need for this, though there may still be cases where a person has been married twice or owns a business or a farm where a discretionary trust may be useful as a means of saving tax.
Those people who have already set up trusts in their Wills may now want to consider changing them in order to remove the trust. Before doing so they should consider whether there may be other reasons for the trust to continue.
Those who will benefit most from introduction of the “double nil rate band” are widows, widowers or surviving Civil Partners whose late spouse or civil partner died without fully using the tax allowance. For instance, if Mr A died three years ago leaving his whole estate to Mrs A, in most cases Mrs A will now have an Inheritance Tax allowance of £650,000, rather than the £325,000 she had previously.
If you would like to discuss these changes further, or would like advice on any aspect of a Will or trust then please contact us.
