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Death and Taxes
The Conservatives’ Conference promise to increase the nil rate band to £1m has succeeded in making inheritance tax front page news this week. They now have just the hurdle of winning a general election to overcome!
In the meantime what advice should you be giving your clients?
They should certainly be using the small gifts; annual; and, where appropriate, the marriage/civil partnership exemptions. Also remember that habitual gifts out of surplus income are immediately exempt.
Outright gifts to other individuals are potentially exempt transfers (PETs) that fall off the “clock” after seven years. Incidentally, it is the tax rate on death that determines the liability while the value of the gift is frozen when it is made. Almost all lifetime trusts now represent immediately chargeable transfers and afford unrestricted CGT holdover relief provided the trust is not “settlor-interested”.
Wills should be as IHT-efficient as possible and those of spouses/civil partners should utilise the nil rate band on the first death. Bear in mind that if the nil rate band is left directly to children the surviving spouse could be disinherited if the relevant figure is £1m at the time of death.
And, finally, do not lose sight of the fact that existing A & M and interest in possession trusts should be reviewed in advance of the deadline for amendment of 5 April next year.
