Review your Nil Rate Band Will
Many married couples have carried out will planning in order to utilise their individual inheritance tax allowances. They have made use of sophisticated will planning involving the use of a trust arrangement, known as a "nil rate band will trust".
This arrangement effectively ring-fences on the first death within a trust environment an amount equivalent to the nil-rate band whilst enabling the surviving spouse to have the benefit, where required, of the trust assets.
Such an arrangement, however, can appear complicated to anyone unused to trust arrangements and particularly so where the main value of the estate lies in the marital home. Even those couples who have been made aware of this tax planning via their lawyers, accountants, financial advisors or otherwise, do not in all cases take up this planning, not only because of its complication, but also because of the costs involved.
As a result of the Government's pre-budget report of 9 October 2007 it would appear that these trusts will not be needed in order to make full use of both parties nil-rate band allowances. This is not to say a discretionary trust within a will already drafted may not be useful for other purposes, such as protection of assets and inheritance tax planning further down the family line, but nonetheless the main purpose for which these trusts were put in place no longer applies.
A spouse will be allowed to transfer any unused part of the nil-rate band to her surviving spouse and the initial indication is that this will be automatic and therefore will benefit those couples who have not hitherto had the benefit of professional advice.
Accordingly, those who have entered into this type of nil-rate band planning may wish to review their wills in the light of this change and whilst the change is welcome, unfortunately the need to review the wills comes on top of the April 2006 legislation in relation to trusts which has already led those who have trusts included in their wills to review them in the light of those changes.
It is still necessary and relevant to plan wills effectively and as it has been suggested that more than 50% of people die without a valid will in place, the need to address estate and death benefit planning cannot be underestimated.