INDEPENDENT FINANCIAL ADVICE CENTRE
Authorised and Regulated by the Financial Conduct Authority
97 High Street
Your Home is at risk if you do not keep up any mortgage or payments secured upon it!
You should remember that past performance is not necessarily a guide to the future. Market and currency movements may cause the value of units, and the value derived from them, to fall as well as rise and you may get back less than you invested when you decide to sell your units. The tax treatment of investments and pensions is not guaranteed and may change in the future.
Until the recent changes these were used to utilise both nil rate bands. Whilst these are no longer necessary to save tax, they could be useful where either party wanted to have control of who benefits from their estate.
You can organise your wills so that a discretionary will trust is set up with the aim of using the nil rate band on the first death. This would effectively reduce the survivors’ estate for the second death calculation, not now essential to save tax but could be useful if control of assets is the objective.
So that the survivor is not left in a situation where they are in need, the trustees should be given the power to loan funds to the survivor. The provision to grant loans must be at the trustees discretion otherwise we believe that it would be classed as a gift with reservation and would therefore not be effective for inheritance tax.
If there are not sufficient liquid assets to fully utilise the nil rate band exemption, it is possible to use property assets. For most of our clients this is the family home and therefore care has to be taken to protect the survivors rights.
One scheme that we have been using which we believe works under current law and practice is as follows:-
The property has to be own as tenants in common, i.e. the owners effectively own their share of the property outright. This is different to joint ownership under which most properties are registered.
If the property is owned as tenants in common each owner can deal with their share of the property independently of other owners. On the joint ownership basis the property automatically passes to the other owner/owners on death irrespective of what is written in the wills.
The idea is that deceased property share up to the nil rate band exemption is left to a trust. The trustees at their discretion can allow the survivor to use the deceased share of the property. On the second death, it is then possible to utilise a second nil rate band exemption.
THE ADVICE CENTRE - making sense of a complicated world