DBF Wills
Professional Will Writing Services.
Following the Chancellor's announcement of a doubling of the Inheritance Tax threshold for married couples and civil partners, there appears to no longer be any IHT advantage to making a Discretionary Trust Will if you are married or in a civil partnership.
However, whilst trying to remain politically impartial, IHT is still an issue worth planning for in your Wills - simply because Labour may backtrack or the Conservatives may get in with different proposals or the HMRC will interpret Mr Darling's changes to the advantage of the Government.
Furthermore, the IHT advantages for couples who are NOT married or in a civil partnership of having Discretionary Trust Wills (i.e. avoiding paying IHT twice on the first estate) remain (I.E. YOU CAN STILL SAVE A LOT OF INHERITANCE TAX). This is because the new legislation has no effect on the IHT threshold for un-married couples.
To keep all options open, we recommend a pair of 'Discretionary Trust' Wills. This type of Will basically leaves the entire estate to a Discretionary Trust managed by the appointed Executors, and allows them 100% flexibility to set up any further Trusts required to maximise any potential IHT saving.
What's more, if there is no IHT saving to be had then the Executors can also simply pass the entire estate directly to the surviving spouse/partner - so even in the worst case scenario the effect is no worse than having a pair of normal Mirror Wills.
So in the very 'worst case' scenario the most you’re going to lose is the 'extra' you've paid for a pair of Discretionary Trust Wills. And in the 'best case' you could up saving tens of thousands of pounds in Inheritance Tax.
TO SUMMARISE:-
If you're married or in a civil partnership then as the new legislation stands:-
If you've already written a pair of Discretionary Trust Wills using our service, IHT-wise you're no better off and no worse off than you were before.
We strongly recommend, however, that you create a pair of 'Discretionary Trust' Wills, as this will keep you in the perfect position to take advantage as and when legislation changes.
Alternatively, if you create a straightforward pair of Mirror Wills, then this will simplify your Estate, you'll still get the new double IHT relief, and you'd still be able to create a pair of Discretionary Trust' Wills, if and when legislation changes in the future.
If you have not previously used our service, you can either make a pair of simple Mirror Wills and then 'update' at a later date to the most suitable Discretionary Trust Will available if new legislation demands it, or bite the bullet now and make a pair of Discretionary Trust' Wills.
The latter option will mean that you'll be in the best position to take advantage of any future changes in legislation without having to re-make your Wills.
If you're a couple but neither married nor in a civil partnership, then nothing has changed and YOU CAN STILL SAVE A LOT OF IHT by making Discretionary Trust Wills. This is because if one of you dies and passes his/her estate to the other, then the first estate attracts IHT at 40% on all assets over the £325,000 threshold and then what's left of it is taxed again at 40% when the second partner dies (assuming that the second partner's estate exceeds the current IHT threshold of £325,000).
A pair of Discretionary Trust Wills will still 'ring-fence' a part of the estate for the benefit of your eventual beneficiaries and ensure that IHT is only paid once on it.
Our recommendation is that if you are in such a relationship and your joint estate exceeds £300,000 then you should make a pair of '2 Year Discretionary Trust' Wills as this will not only protect you now but also position you well whatever future legislation may throw at you.