Last Will and Testaments  

Inheritance Tax

With regards to Inheritance tax (IHT) there are a number of options available:
Remember IHT is charged at 40% on any amount over the current Nil rate band of £320k.

You can make transfers of money or assets within your lifetime and as long as you survive for more than seven years the gifts are free of IHT.  If the Donor survives more than 3 years but less than 7 years the tax is paid on a tapering basis.

There is no IHT chargeable between Husband and Wife however there is on the second death.  By skipping a generation you can make use of  a Mini-(Nil rate Band) Discretionary Trust,

As from October 2007 it is now possible for married couples to roll the nil rate band allowance from the first death to the survivor and on their death effectively doubling the allowance to £640K. In the majority of cases this is sufficient to eliminate the need for further planning.

Other relief may apply:
Business Property relief also applies which takes the form of reducing the value of the property by 100% or 50% depending upon the type of business and type of share holding.

Relief is also available for agricultural land and buildings, however this is dependant on the number of years you have occupied the land.

Any gifts to charity are free of IHT.

There are a number of other actions which can be taken to limit the effects of IHT you should speak to the Willwriter for more information, so we can advise you based on your individual requirements.

With Reference to the Community Care Act 1990
This Act title is shortened from The National Health Service and Community Care Act 1990 and it. has far reaching consequences for everyone.

The essence of this Act is that the local authority will provide for you if your funds are below the means tested level. If you are over that level then you can pay your own way.

If a Will left all the estate to a spouse and that spouse was in a nursing home, that inheritance would be used to pay for the fees. Limiting the gift to the surviving Spouse.

Gifting the remainder of our estate to the children would seem to be a solution,

On the first death his share of the estate can be placed in trust (this would require several trustees) for the benefit of the surviving spouse. As it is a trust the spouse does not own the trust and therefore would not be taken into consideration for either Inheritance tax or in relation to the Community Care Act. On the second death the trustees would distribute the remaining trust as specified in the Will.

Joint assets

Another method of limiting the damage is to use separate bank accounts.

If there where joint savings of £20,000 and the spouse enters into a nursing home she will be assessed as having £10,000 capital. If £2000 from this capital is spent on nursing home fees, the joint savings would be £18,000 and she would be assessed as owning £9000. In these circumstances she would not be eligible for Income Support and would have to continue paying out of savings.

This can be minimized by having separate accounts, then when £2000 has been spent on fees the wife will be entitled to apply for income support. I.e. her savings fall below the means tested limit

Whilst in joint names if the testator dies then the whole sum will belong to the survivor, the capital sum of £20 000 may deprive her of Financial Assistance.

In summary the way to limit the effect would be to have separate accounts and trusts set up for the first death.

The setting up of Trusts and type of trusts (Will Trust) can be advised when the Will Writer visits to take the details.

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