One of the biggest changes in 2017 to the Will industry, was the introduction of a new inheritance tax allowance, called the Residence Nil Rate Band (RNRB). This allows individuals with children (which includes step-children) to gift an additional £100,000 on top of their £325,000 allowance, from April 2017. For example, if you had died in May 2017, you could potentially give £425,000 tax free so long as you were also giving equity in property, that you have lived in, to your children. The £100,000 will rise each year and so in April 2020 the allowance will be £175,000 per person.
Although this sounds fairly straightforward, it can cause issues! For example, you may want to give your spouse everything on first death, but if on second death the value of the whole estate is over £2m, then you may not be able to benefit from this new allowance at all, depending on how far over £2m you are (£2,250,000 for example, means you have no allowance left - so the most you can leave tax free to anyone other than your spouse will be £325,000).
We have spent many hours at Oliver's Wills, attending seminars and listening to industry commentators about this new allowance, and while it is a good thing if you have an estate over £325,000, and have residential property, and have children etc., everyone should get advice about how to plan for this allowance and whether your Will should be amended or left as it is.
Although this sounds fairly straightforward, it can cause issues! For example, you may want to give your spouse everything on first death, but if on second death the value of the whole estate is over £2m, then you may not be able to benefit from this new allowance at all, depending on how far over £2m you are (£2,250,000 for example, means you have no allowance left - so the most you can leave tax free to anyone other than your spouse will be £325,000).
We have spent many hours at Oliver's Wills, attending seminars and listening to industry commentators about this new allowance, and while it is a good thing if you have an estate over £325,000, and have residential property, and have children etc., everyone should get advice about how to plan for this allowance and whether your Will should be amended or left as it is.
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