INDEPENDENT FINANCIAL ADVICE CENTRE

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Billericay

Essex

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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.  

Immediate Post Death Interest Trust (IPDI)

An IPDI Trust is a way of arranging money or property for the benefit of other people without giving them control over it. You can create a Trust in your Will known as a Will Trust. On your death it is then up to the Trustees, whom you appoint in your Will, to ensure your wishes are carried out.


A Will can be so written to establish an Immediate Post Death Interest Trust (IPDI) which allows a surviving spouse to live in a property for the rest of their life. When the surviving spouse, known as the beneficiary, dies the property then passes to the children specified in the IPDI Trust.


Provided the creator of the IPDI Trust was married to or in a civil partnership with the beneficiary, there is no Inheritance Tax payable on the first death, meaning the house does not have to be sold to pay any Tax.


Although IHT will be payable when the second spouse, the beneficiary, dies due to the IPDI Trust created in the Will, the IHT Nil rate band is transferable to the surviving spouse, which thus allows up to £650,000 to pass to the next generation Inheritance Tax free.


There are other taxes to consider such as Income Tax and Capital Gains Tax, but these can be minor or non-existent if money is invested appropriately and property dealt with correctly. One must also ensure the property is owned as either “tenants in common” or even just by one person. A Will cannot control “jointly” (Joint Tenants) owned property.


It is important when arranging these that the life tenant’s beneficiaries understand the implications of the possible “hi-jack” of the life tenants “Nil Rate Band”.


For example, this process lets the trust make maximum use of a couple’s joint “Nil Rate Tax Bands”  So if the estate exceeds the joint exemption (currently £650, 000) the excess is taxable at 40%.


 

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