TWP warns people that Wills could have an unexpected consequence on Inheritance Tax
13th October 2017
Weybridge-based accountancy firm, TWP, is encouraging families to review their Wills to ensure they minimise their beneficiaries’ tax liabilities.
The prompt comes after a number of recent changes to Inheritance Tax (IHT) reliefs, including the introduction of the Residential Nil Rate Band (RNRB).
This relief, introduced in April this year, gives individuals an additional £100,000 of exemption from inheritance tax on a property if it is passed to a direct descendant.
However, by April 2020 this exemption will have increased to £175,000, meaning that couple could benefit from an extra £140,000 in tax relief, bringing their total IHT exemption to £1 million.
Factors determining how much relief, if any, will be available include the value of a person’s home or previously owned home, the value of their estate and the extent to which the property or its value is passing ‘directly’ to their descendants.
Mike Dawes, a specialist Tax Consultant at TWP, believes that because of RNRB more people should review their Wills and consider professional estate planning to ensure that opportunities for tax relief are not lost.
He said: “This new relief is very generous and offers the chance to make significant savings on inherited wealth. However, the amount of relief available relies upon a wide range of factors, meaning that an outdated or improperly drafted Will could leave beneficiaries with a larger IHT bill.”
In addition a recent case highlighted the problems that can arise from mutual Wills. In Legg v Burton 13 separate Wills made by the late June Clark, between 2004 and her death in 2016 were ruled invalid by the High Court in England and Wales.
During the proceedings it became clear that a Will she executed in July 2000 at the same time as her husband, was held to be a mutual Will binding on her estate, despite later Wills being drafted.
“In this example the earlier mutual Will ‘set in stone’ her intentions and subsequent Wills made later in life were ruled invalid, creating a number of issues not only for family members who were challenging the Wills, but also preventing subsequent planning opportunities” said Mike.
“The decision rested on the couple’s intentions at the time of making their Wills and if such an outcome isn’t what is really what a family wants then action should be considered now to avoid the same consequences.
“It’s therefore a good time to be thinking about Wills and estate planning for you and perhaps other members of your family to ensure your wishes are met.”
TWP has years of experience in these areas and can give practical solutions to avoid unexpected consequences.
To find out more about TWP’s wide range of tax and accountancy services, please call +44 (0) 1932 70470 or visit www.twpaccounting.co.uk