From 6 April this year the new Residential Nil Rate Band (RNRB) will allow an additional £100,000 of property to be passed, by your Will, to direct descendants alongside the current individual Inheritance Tax free allowance of £325,000.
This raises the value of property that a couple can pass on death without incurring an Inheritance Tax bill to £850,000 and is set to incrementally rise to £1,000,000 by 2020.
As Inheritance Tax is charged at 40%, this represents significant savings to estates that qualify.
To qualify for the RNRB, individuals will need to be gifting their main residence directly to descendants; children, step children, adopted children or grandchildren.
It is estimated that a significant number of wealthier families will lose out on the benefit where they have made arrangements to pass their assets into discretionary trusts unless they take action to review these arrangements.
It is a good idea to review any tax planning and trust arrangements that you have in place to ensure that the benefit is not lost. There are also possibilities for families to amend arrangements by a deed of variation to capture the benefit for up to two years post death.Find out more about our Trusts & Estates department