Overcoming IHT challenges
Inheritance Tax (IHT) poses a huge problem to many British families, with reports suggesting that each year, more and more estates are pushing above the £325,000 IHT threshold or nil rate band, above which IHT is incurred at 40 per cent.
The nil rate band has remained frozen at £325,000 for several years, despite ever-increasing property prices and general wealth all across the country.
Due to this, families are seeking other ways of mitigating their IHT liability, such as the additional residence nil rate band (RNRB), which can enable those who wish to leave property to direct lineal descendants in their Wills to pass on an additional £125,000 in property value tax-free.
Other ways of paying less IHT on an estate include leaving charitable legacies in Wills, which can help donors to pay a lower percentage rate of IHT on their estate in instances where they have donated a certain amount.
However, these are not the only options available to families which solicitors can help with.
By seeking specialist legal advice, families can also set up a legal document known as a deed of variation (DOV), which effectively enables the beneficiaries of an estate to ‘make changes’ to a Will after the person named in it has passed away.
These documents, which can be set-up within 24 months of a death, can prove beneficial by enabling families to redirect money to pass to other beneficiaries, such as grandchildren, in such a way that reduces – or even completely eliminates – the amount of IHT that would otherwise be due.
However, all executors and beneficiaries of the Will must meet together and sign the document in order for it to be valid, and seeking specialist advice is vital.