Nil Rate Band Discretionary Trusts – Saving Inheritance Tax?
Are you a widow or widower whose late spouse has a Nil Rate Band Discretionary Trust clause in their Will?
Was the Trust dealt with correctly and the appropriate procedures followed?
Before September 2007, one way to reduce Inheritance Tax liability for a couple whose assets exceeded the single Nil Rate Band (now standing at £325,000) was to create a Nil Rate Band Discretionary Trust. This meant that when the first spouse died, an amount equivalent to the Nil Rate Band at the date of death would pass into a Trust and would be dealt with in accordance with the provisions of that Trust. Typically, the Trustees would lend the funds to the surviving spouse, thus making use of what is known as the “debt scheme”.
Upon the death of the second spouse, the debt would be repaid to the Trust, thereby reducing the value of the second spouse’s estate, thus minimising, if not avoiding completely, any liability to Inheritance Tax.
Whether or not the existence of the Trust is right for you depends entirely on your own personal circumstances. Our specialist lawyers at Bennett Griffin give tailored advice to you and your family to enable you to make an informed decision as to whether the Trust should run or be wound up.
It is of vital importance to consider the effect of the Trust on your overall tax position. Simply ignoring it can create issues upon the second death, not least of which is the possibility of investigation by HMRC.
Bennett Griffin solicitors can guide you through this process, whether you are recently bereaved, or if your spouse passed away some time ago, to ensure that the Trust is administered according to the law.
If you would like any further information or advice please do not hesitate to contact us.
The information contained in this article is for general guidance only and is not intended to be legal advice. Professional advice should always be taken on the application of the law in any particular situation.