If you don’t update your Will you could lose a £70,000 Inheritance Tax break?
Yes it’s true. When it comes to Inheritance Tax, doing the right thing can actually be doing the wrong thing. The new Residence Nil Rate Band is a very useful extra Inheritance Tax allowance. Each spouse can get an extra allowance of up to £175,000 by the time it is fully rolled out in April 2020.
But there is a catch.
If the survivor leaves assets of over £2M, the allowance is reduced and can actually be lost altogether.
Here’s an example. Say we have a married couple with an estate of £1.5M each giving them a total of £3M. The husband dies and leaves everything to the widow. There is no IHT payable as the estate is surviving spouse exempt.
The widow then dies. As her estate is over the upper limit of £2.7M she loses the Residence Nil Rate Band altogether. So she loses the extra allowance of £175,000 and pays an extra £70,000 in Inheritance Tax.
The McClure solution is to change the Wills so that on the first death some of the estate goes directly to the children with the result that the survivor’s estate is below the threshold and the full Residence Nil Rate Band is available.
In other words having a standard Will in favour of each other can in some circumstances be very expensive.
So why not arrange a chat with one of our Consultants.
Home visits are available.
McClure Solicitors in association with McClure Wealth Management