Inheritance Tax Planning in wills


#1

I would be grateful for any assistance from members on the following situation.

I have clients in their early seventies who are not married ( they would consider marriage if required).
The couple have one child together and there is another child who belongs to the mother from a previous relationship.
They have a house worth approx. £1million and very little in the way of liquid assets.
They wish to treat both children equally.
They also want to plan so as to minimise any inheritance tax ( thinking of RNRB) and where possible plan so that they can ring fence some of the estate from care home fees.

Collette Hodkinson
CPH Solicitors


(Simon James Northcott) #2

They need to get married, to maximise the RNRB, and enable half the estate to be held on a life interest trust on the first death without paying IHT at that point.

Simon Northcott


(Kaskar) #3

As Simon suggested, they would have additional IHT advantages if they were married. They can then have a “life interest” Will in place.

Ruksana Kaskar
Hamilton Davies LLP


(Paul) #4

Marriage would make things easier but it doesn’t increase the overall amount of the allowances. If their joint estate is worth about £1m and if that value is shared 50/50 then they ought to be able to avoid paying IHT (when the RNRB reaches its full amount in another couple of years). What they should not do of course (from an IHT perspective) is each leave their estate to the other and the corresponding challenge therefore is to anticipate the practical problems that might arise as a consequence of this during the life of the survivor. In this situation I would suggest they each make discretionary trust wills and sever the joint tenancy (if any) over the property. Further thought will be needed post-death - e.g. a share of the property might be appointed onto an IPDI trust for one of the children to make use of the RNRB at that time.

Paul Davies
DWF LLP


(Jade Gani) #5

I agree with Simon and Ruksana - they should marry to make the most of the IHT advantages otherwise if one passes away before the RNRB hits its highest point then they won’t benefit from the maximum amount. Life Interest Trusts are quite common in these circumstances and also serve to protect half the value from care fees.

Whilst an option to consider, I think a Discretionary Trust might entail too much administration for its worth (when a simpler Life Interest Trust is adequate) in this situation and of course it has its own ongoing IHT regime to consider (e.g entry, exit and anniversary charges). Paul is correct that careful post-death planning would be required if your Clients opt for this.

Jade Gani
Aston Bond