The Residential Nil-Rate Band – Have you reviewed your Will?
MS Rubric solicitors are currently in the process of reviewing all the Wills held in their safe store in light of the Residential Nil-Rate Band (RNRB).
Currently, inheritance tax (IHT) is charged on your death at the rate of 40% based on the value of your assets that exceed the existing Nil-Rate Band (NRB) which is currently set at £325,000. The RNRB is an additional inheritance tax relief which was introduced on 6 April 2017 which applies to estates where a person leaves their interest in their home, or share of it, to direct descendants, such as children or grandchildren. Therefore, provided the family home is left to ‘direct descendants’ then it helps to reduce the amount of IHT paid on your death.
The RNRB is currently £125,000 and is due to rise to £150,000 this year. In the case of married couples or civil partners, any unused RNRB can be transferred to the surviving spouse’s estate. This is the same as any unused NRB.
If the net value of your estate is above £2million, the RNRB will be tapered down.
Your Will and tax savings
The provisions of this tax relief are complex but the structure of your Will may mean that you do not benefit from it and could potentially miss out on tax savings.
If you have a trust in your Will, particularly a discretionary trust, then you should consider reviewing it to ensure it makes use of the tax saving benefit of the RNRB. The RNRB will only be available in this situation if direct descendants are named as discretionary beneficiaries of the trust and an appointment is made (via a deed) out of the trust within two years of death. It should be noted that the drafting of such a deed would be more expensive than updating your Will naming the children as absolute beneficiaries. Why not make the changes now?
Other reasons to review your Will
There are also other reasons you may wish to review your Will, such as if you want to change who is to administer your estate on your death, whether you have additional beneficiaries, such as grandchildren you now wish to benefit; or your circumstances have changed and you wish to revise the whole document.
If you would like to speak to someone about making a Will or reviewing a current Will free of charge (whether it was prepared by MS Rubric or not), then please contact Christian Evans, Head of our Private Client department on 01454 800 008.