If you have made a will you have definitely done the right thing. But if you made the will before April 2017 it’s highly likely to be out of date.
Changes to the rules surrounding the taxation of an individual’s estate came in to force last year which mean that the value that can be passed to direct descendants will gradually increase.
Until April 2017 the amount that could pass ‘zero rated’ for inheritance tax (IHT) was £325,000 per person, this is known as the Nil Rate Band (NRB). The allowance can carry over to a surviving spouse on first death giving a joint NRB of £650,000.
The introduction of a new allowance specifically aimed at passing some, or all, of the value of the family home or previous residence on to children and grandchildren, known as the Residence Nil Rate Band (RNRB) came into effect with the ability to pass an additional ‘zero rated’ £100,000 on. This figure increases gradually to £175,000 by 2020 thus giving the possibility of a joint tax-free legacy of up to £1m.
Care must be taken however, as without planning, individuals with an estate value of £2m will see their additional RNRB allowance eroded, leaving those with estates worth £2.7m or more without the additional benefit.
Confused? Estate planning can be a minefield and it is worth getting appropriate advice to help protect your estate from the tax man, local authority, creditors or gold diggers.
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