How can I effectively plan my affairs to make my estate inheritance tax efficient?
With property prices at an all-time high, and most mortgages carrying a life insurance which ensures the outstanding debt is paid off at death, a large number of married couples have a combined estate worth well in excess of the Inheritance Tax (IHT) threshold (currently £300,000). This can give rise to potential demands for large (and unnecessary) IHT payments.
Since all transfers, no matter how large, between spouses are tax free, IHT can easily be avoided entirely upon the first death.
Without proper planning however, a large IHT liability can be incurred when the surviving spouse dies. For a combined estate worth £535,000 (£235,000 above the IHT threshold), that liability would be £97,000, all of which could have been avoided simply by making and implementing a pair of correctly worded Wills known as Discretionary Trust Wills.
Basically, Discretionary Trust Wills (sometimes referred to as Nil Rate Band Discretionary Trust Wills) work by using up both IHT thresholds for both spouses. The attached document explains the details of how they work.
Please also note that, whilst providing useful information on the function and tax advantages of Discretionary Trust Wills, the attached document is by no means exhaustive. As legislation changes all the time, all information is given without warranty of any kind.
