Wills - More Information

In view of the length of time Jackson Barrett & Gass has been in practice, and in view of the number of Wills held for clients over the years, we have a significant number of clients who would fall within the accepted definition of "elderly".

For such clients, particularly those who do not have family and friends or who do have family and friends but not geographically close-by, we offer a full care service. We will look after that person's financial affairs, including ensuring the correct investment of the monies available, the operation of bank accounts, the collection of pensions and payment of care fees and income tax.

Inheritance Tax Planning

Inheritance Tax (IHT) is tax payable on your Estate upon death. For the 2010/2011 tax year, the IHT rate is 0% on the first £325,000 (the "nil-rate band"), and 40% on the rest of the value, at death, of an individual's tax estate. The nil rate band usually rises annually but is currently frozen; tax is only payable on the value of an estate above the nil rate band.

The Chancellor of the Exchequer's Autumn Statement on 9 October 2007 announced that with immediate effect inheritance tax allowances (often referred to as the nil-rate band) were to be transferrable between married couples and between civil partners. Thus, for the 20011/12 tax year, a married couple will in effect have an allowance of £650,000 against IHT, whilst a single person's allowance remains at £325,000. The mechanism for this enhanced allowance is that on the death of the second spouse to die, the nil rate band for the second spouse is increased by the percentage of the nil-rate band which was not used on the death of the first Spouse to die.

For example, if in 20011/12 the first married Spouse (or civil partner) to die were to leave £130,000 to their children and the rest of their Estate to their Spouse, there would be no IHT due at that time and £195,000 or 60% of the nil-rate band would be unused. Later, upon the second death, the nil-rate band would be 160% of the allowance for a single person; so that if the surviving Spouse also died in 2011/12 the first £520,000 (160% of £325,000) of the surviving Spouse's Estate would be exempt from IHT. If the surviving spouse died in a later year when the nil-rate band had reached £350,000, the first £560,000 (160% of £350,000) of the Estate would be tax exempt.

This measure was also extended to existing widows, widowers and bereaved civil partners on 9 October 2007. If their late Spouse or partner had not used all of their IHT allowance at the time of the spouse's death, then the unused percentage of that allowance can now be added to the single person's allowance when the surviving spouse or partner dies. This applies irrespective of the date on which the first spouse died, but special rules apply if the surviving spouse remarries.

In a judgement following an unsuccessful appeal to a 2006 decision by the European Court of Human Rights, it was held that the above does not apply to siblings living together. The crucial factor in such cases was determined to be the existence of a public undertaking, carrying with it a body of rights and obligations of a contractual nature, rather than the length or supportive nature of the relationship.

Prior to this legislative change, the most common means of ensuring that both nil-rate bands were used was called a nil band Discretionary Will Trust. These remain valid, but 100% of the estate is now usually passed to the surviving spouse.

Due to these changes, a Discretionary Will Trust is no longer used for IHT saving, but can have other applications.

There are effectively only two ways of dealing with IHT. The first is to give your assets away either during lifetime or upon death. There are deductions for the following:

  1. All assets left to a UK-registered charity.
  2. Some political donations to major political parties.
  3. Gifts of up to £3000.00 in total in a given year.
  4. "Small gifts" of up to £250.00 made to separate individuals.
  5. Some business assets under Business Property Relief or "BPR".
  6. Some farmland under Agricultural Property Relief or "APR".
  7. Gifts made out of income that do not affect the standard of living of the donor.
  8. Gifts made in contemplation of a marriage or civil partnership. The allowance ranges from £5000.00 to £1000.00 according to the closeness of the relationship of the donor to the person marrying or entering into a civil partnership. £5,000 for close family, e.g. wife and children, £2500.00 for grand children, £1000.00 for anybody else.
  9. The second is to provide for the tax, by way of providing a fund of money usually held in trust and often via an insurance policy to provide a fund to pay the IHT as it falls due.

We have wide experience in dealing with these matters, and a Will costing a modest sum, could lead to a significant IHT saving.

Will Solicitors

To arrange a discussion, please get in touch with Nicola Lloyd on 01625 523988 or mail@jbgass.com.