Quilter 9 Wills Writing a will and keeping it up to date is an essential part of IHT planning Many people wrongly believe that their whole estate will go to their spouse/civil partner * when they die. However, this only applies if a will has been drawn up and provides for this to happen. Writing a will means you can specify exactly how you would like your assets to be distributed after your death and allows you to name your executors as well as the guardians for your children. It can also be used to reduce your tax bill. Even if you have a will, it must be up to date and reflect your wishes, assets and current tax position. Marriage, civil partnership, divorce or dissolution can all have an impact on an existing will. If a person dies without having made a will, then they are said to have died ‘intestate’. In such cases, a variety of problems can arise such as: assets being distributed to individuals according to the intestacy rules (as described on page 10) rather than to those chosen by the deceased possible delays in the settling of a deceased’s affairs, which could prove distressing for a surviving spouse/civil partner or other members of the family an avoidable IHT bill being incurred. Utilising the nil-rate band for married couples and civil partners Within your will, you can include specific gifts to reduce the taxable size of your estate. It may not be tax-efficient to leave everything to your spouse/civil partner as you may effectively just be passing on some of the tax burden. Instead, it may be better to leave an amount to your children up to the available nil-rate band. Alternatively, the nil-rate band can remain unused when the first spouse or civil partner dies. On the death of the surviving spouse or civil partner, their legal personal representatives or executors can claim any available unused nil-rate band from the first of the couple to die in addition to that of the second. Whether to use the nil-rate band on first death or allow it to be carried forward until the second person dies will depend on various factors. Your financial adviser will be able to explain how the transferable nil-rate band can be claimed and whether this approach is suitable for you. Residence Nil-Rate Band – since April 2017 The residence nil-rate band was announced in the Summer Budget of July 2015, where it was confirmed that it would be available in addition to the existing nil-rate band (NRB) of £325,000 (frozen until 2021). This residence NRB started in the 2017/18 tax year at £100,000 and has risen with £25,000 increments each tax year until it eventually reached £175,000 per person in the 2020/21 tax year. The additional allowance is only available where a family home or ‘main residence’ is transferred to a direct descendant of the deceased. There are also provisions to ensure that those individuals who have had to sell the family home or have downsized are also protected under the new legislation. Writing a will means you can specify how you would like your home to be distributed after your death or, if the home has been sold, how the assets of equal value are to be distributed to ensure your estate can benefit from this additional NRB. The residence nil-rate band can be transferred to a surviving spouse/civil partner in the same way as the transferable nil-rate band. Your financial adviser will be able to discuss this with you. * As defined by the Civil Partnership Act 2004.