Will Writing Service
It is advisable for each individual to make a Will in order to utilise their nil-rate band effectively. For married couples, it is worth considering bequeathing up to the nil-rate band to children/grandchildren rather than to each other. This can have a potential tax saving of £114,000.
Deed of Variation
Currently it is possible to alter Wills after death by means of a Deed of Variation. This can be used for IHT purposes. For example, a parent inheriting assets might wish them to go to the children directly or a rich son might want his less well-off sister to have his inheritance. The Deed can work even if someone dies without having made a Will (Intestate).
The Deed has to be effected within two years of death. If the Deed is done for tax purposes the Inland Revenue Capital Taxes Office must be informed within six months of the Deed being set up. You cannot always set up a Deed of Variation and it may be that legislation may restrict the use of Deeds of Variation in the future.
Gifting your Home
This will not work for Inheritance Tax purposes, if you continue to live there as it would be regarded as a ‘gift with reservation’. However Equity Release Schemes could offer scope to reduce the Inheritance Tax problem.
Making a Will
There are many reasons why only a very small number of people actually make a will but often, it's simply something that we don't get round to doing!
Whether we don't want to think about it or whether we're making the assumption that things will be fairly straightforward to sort out after we die, the fact is that making a will and keeping it up to date could be one of the best things we do in our lives.
If you die without a valid will, you die `intestate'. This means that rather than being divided according to your wishes, your estate will be distributed amongst the surviving members of your family under rules of Intestacy. The proportions will vary depending on your circumstances at the time of death but usually a certain amount will be passed to a surviving spouse and any children. If you don't have children, other relations may also benefit, whether you (or your spouse) want them to or not. If there are no surviving relatives, the estate passes over to the State.
It is particularly important to make a will or update your existing will if you get married or re-marry. Any previous will becomes invalid and any ex-spouse will not benefit, even if you want them to, unless you specify in your new will. This does not apply of course unless you are actually divorced so if you are separated and do not wish your ex-spouse to benefit from your death, you must make a will or update your old one.
If your estate passes under intestacy rules, there could be a long and complicated (not to mention costly) legal process to sort everything out and although making a will doesn't necessarily mean inheritance tax can be avoided, it could be a way to ensure that the tax burden is greatly reduced.