Why you should always have a WILL in place and consider Inheritance Tax planning for the future

Private Client Team with Natalie Thomas - Associate Director - DJM Solicitors

Having a will ensures your estate is distributed according to your instructions and wishes.

If you die without having made a will, your assets are automatically distributed according to the Rules of Intestacy. The distribution depends on whether you are married (or in a registered Civil Partnership) and whether you have any children. This may well have undesired consequences.

When making a Will, you should firstly consider who your executors will be. These are the people you trust to administer your estate according to your will.

You should next consider who you want to benefit from your estate. Your spouse or partner is typically the first beneficiary, other beneficiaries may include children, relatives, friends, charities.

Your Will can name classes of beneficiary (eg all your grandchildren – including those who may be unborn at the time of writing the will).

The Will should also consider what will happen if a beneficiary predeceases you: for example, whether you would want your deceased child’s share of your estate to pass to his or her children.

Gifts can be put in trust rather than made out-right. For example, you might use a trust to control assets that are being passed to children (or young adults) or to individuals who are incapable of look-ing after their own financial affairs.

When preparing a Will, we always consider the Inheritance Tax position of your estate.

Inheritance Tax (IHT) is chargeable on your estate if it exceeds the IHT nil rate band (NRB) (currently £325,000). If you leave your residence to your children, you can claim an additional £175,000 (As of April 2021) known as the Residence Nil Rate Band (RNRB).

Inheritance tax is charged at 40% on the value of your estate in excess of the nil rate sum.

Effective planning can substantially reduce the amount of tax that will be payable on your estate.  If your estate is likely to exceed the nil rate sum, it is worth discussing how family trusts and other planning options could benefit you.

If your estate is valued at less than the nil rate band, IHT is not payable. Equally IHT is not payable on any inheritance you leave to your spouse. In addition, if your own estate does not use up the full nil rate sum, then your spouse’s tax free allowance on their death will be proportionately increased.

You can reduce IHT by giving away up to £3,000 a year and small gifts to other people of up to £250 each.

Larger gifts can avoid IHT provided you survive at least seven years from the date of the gift. To qualify, you must not continue to benefit from the assets you have given away.

Other IHT reliefs include reduced IHT on some business assets.

The tax treatment of family trusts is complex and depends on the type of family trust being used.

While gifts and family trusts can reduce the value of your estate (and consequently any IHT liability), always remember to retain enough for your own financial needs.

The most effective IHT planning tends to be done early and takes a balanced approach to risk.

Please speak to our Miss Natalie Thomas if you wish to discuss this further.

DJM Solicitors – 16 Axis Court, Mallard Way, swansea Vale, Swansea SA7 0AJ 01792 650000

Chelston House, 103 Newton Road, Mumbles, Swansea SA3 4BN 01792 304090




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