Wills & Financial Planning
There are several aspects of financial planning that may be of importance when making a will.
1. Inheritance Tax
• this is a tax at 40% payable on the value of your assets when you die. Each individual can leave £325,000 free of Inheritance Tax (the Nil Rate Band) and a surviving spouse/civil partner can on his/her death use any amount of the deceased spouse’s/partner’s Unused Nil Rate Band. In effect therefore for most families there is £650,000 of relief before Inheritance Tax is payable.
• Gifts to Spouses/civil partners and Charities are also free from tax which means that in the vast majority of situations Inheritance Tax is not a major problem.
• Certain types of assets such as farmland and trading business assets are also normally free from Inheritance Tax but there are traps for the unwary.
• Like all taxes Inheritance Tax is complicated and there are many pitfalls and traps to be avoided so if you think your assets may be above the Nil Rate Band or if you own agricultural and/or business assets it is well worth taking advice as any excess will be charged at 40%
2. Income Tax/Capital Gains Tax
• Whilst neither of these taxes is actually payable as a result of dying they must be borne in mind when planning the ownership of assets for Inheritance Tax purposes
• There is a tax free revaluation for Capital Gains Tax purposes on death so it often makes more sense to retain assets than give them away for Capital Gains Tax purposes whereas for Inheritance Tax the opposite is usually true
• If the Income Tax burden is increased by moving assets between husband and wife or civil partners that may negate any benefits from saving Inheritance Tax
• This is why all cases must be considered on their own facts.
3. Residential Home Charges/State Benefits
• For many families this is a more important area than Inheritance Tax.
• It is increasingly difficult to take assets and in particular houses out of the reckoning in a way that is both safe and effective (see “I Don’t Want the State to Take my Home!” article here)
• It is however possible to make plans where for example on spouse/civil partner is likely to need residential care if the other dies
• Similarly careful use of trusts can enable disabled beneficiaries to be provided for without affecting any state benefits they may be getting
4. Other Factors
• The above are factors that should be borne in mind in appropriate circumstances but they should never override the prime reason for making a will which is to provide properly for those you wish to benefit
• Making proper financial provision for your dependants is what it is all about. If however you think any of the above may be relevant to you it is important that it is discussed and the solution that is right for you and your family is chosen. This is not a situation where “one size fits all” which is why it is important that your individual circumstances and wishes are discussed and the right provisions put in your will.
If you want advice on this subject then please contact a member of our Wills, Probate and Trust Team as follows:-
On 01775 722261, or email firstname.lastname@example.org,