A Swansea based firm specialising in estate planning is warning that families could lose out on a substantial new tax break if their will is not updated.
As of 6 April this year, a new tax break – the residence nil rate band – came into play. This gives individuals a new allowance of £100,000 to offset the cost of their family home in addition to the current £325,000 inheritance tax free amount.
The amount is set to rise by £25,000 each year until 2020. In April 2018, it will be £125,000; in 2019 it will be £150,000; and in April 2020 it will stop at £175,000.
However Wayne Dyer from Compass Will Writers warned that to benefit from the tax break, individuals need to be aware that they may need to change their current arrangements around estate planning.
“The rules around the residence nil rate band are really quite complex and of course every family will have a different set of circumstances so there is no one size fits all way to approach it.
But it does mean that some of our more standard practices in estate planning need to be looked at because the break is only accessible if the property is left in a will to direct descendants, ie, children or grandchildren.
So arrangements around trusts for example, a popular way of families to control assets after death, should be looked at. If the family home was left in a trust, beneficiaries could miss out on the tax break as the property is technically owned by the trust not the beneficiaries.
I’d advise anyone that thinks their estate will incur inheritance tax to review their current plans and seek advice.”
Compass Wills Writers has been providing expert advice to businesses and personal clients throughout the UK for 16 years, focusing on offering an affordable and personalised service that helps people protect what they’ve worked hard for.