On October 9th 2007, in his pre-budget speech the Chancellor announced that the nil rate band allowance (the amount that can be left on death without giving rise to inheritance tax), at present £312,000 (2008-9) and rising in stages to £350,000 for the year 2010-11 would be transferable for spouses and civil partners. This means that any un-used allowance on the first death of a spouse or civil partner can be transferred to the surviving spouse/civil partner when they die.

Does this mean the end of tax efficient Wills?

NO

Ask yourself - do you want to guarantee that your assets go to your intended beneficiaries in the most tax efficient way?

Many couples need some form of estate and tax planning advice and may benefit from trusts being set up in their Wills.

Benefits of using a discretionary trust within your Wills

The advantages are:

• They are far more flexible
• They allow the nil rate band allowance to be locked away on first death and not put at risk if legislation changes
• The trust could potentially grow and that growth would not be subject to inheritance tax
• The trust could not be re-directed to other beneficiaries in the event of re-marriage and would not be exposed to long term care fees
• If, in the case of both spouses dying and leaving young children, the setting up of a nil rate band discretionary trust for each spouse would not be subject to the taxation on trusts. However, in the same scenario if they had simple Wills and a trust set up, for example, two times the nil rate band allowance (i.e. £624,000) this would be subject to the taxation on trusts.
• You can adopt the new rules on first death, if that is preferable

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