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Family Will Planning: Using The Nil-Rate Band On First Death

To be effective, It needs to be used properly ...



When it comes to family will planning, have you heard of the nil-rate band on first death? It sounds like a mouthful, but when it comes to Inheritance Tax (IHT), it's a really useful relief ...

When it comes to family will planning, the nil-rate band on first death can be a useful relief!

When it comes to family will planning, the nil-rate band on first death can be a useful relief!

copyright: blackzheep / 123rf stock photo

Everyone has a nil-rate band of £325,000 for IHT purposes. Assuming they have made no gifts in the seven years prior to death, this will be available on death to reduce the value of their taxable estate.

"From 9 October 2007 it has been possible to transfer any unused balance of the nil-rate band to the surviving spouse or civil partner!"

You may think that this keeps things simple on the first death and decide to leave everything to your surviving spouse or civil partner in your will. However, there may be reasons why you want to use the nil rate band on first death.

Here are some good reasons why:

  • Bank it don't lose it

    It is possible to improve the loss of any exemption by banking the nil-rate band on first death.

  • Assets can grow outside an estate

    Rather than have assets growing in value within the estate of a surviving spouse or civil partner, consider passing the assets into a discretionary trust.

  • Building in the protection of capital for future beneficiaries

    Rather than give wealth to a spouse or civil partner on first death use the nil-rate to pass the assets to other beneficiaries.

  • A maximum of only one transferable nil-rate band

    Only one nil-rate band is available, so if someone has been widowed twice or more, the balance of the unused nil-rate band must be determined and then capped at the limit of £325,000.

  • To avoid a reservation of benefits

    Often, passing assets to a surviving spouse or civil partner generates no IHT liability due to the luxury of spousal exemption. However, the survivor now has to do their own Inheritance Tax planning and it may be beneficial to gift assets to other beneficiaries on the first death using as many IHT reliefs as possible.

The whole area of family will planning is pretty straightforward, but it needs to be done properly to ensure the minimum amount of Inheritance Tax is due.

"Would you like to know more?"

If you'd like to find out more about family will planning, the nil-rate band on first death or Inheritance Tax in general then do give me a call on 01908 774323 or click here to ping me an email and let's see how I can help you.

Until next time ...


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More about Helen Beaumont ...

Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.