"Wealth is not his that has it, but his that enjoys it"
"Wealth consists not in having great possessions, but in having few wants"
"Time is the most valuable thing a man can spend"
- Laertius Diogenes
"The glow of one warm thought is to be worth than money."
"I don't care too much for money for money can't buy me love"
- The Beatles
"Simple, genuine goodness is the best capital to found the business of this life upon. It lasts when fame and money fail, and it is the only riches we can take out this world with us."
-Louisa May Alcott, Little Men
"And though I have the gift of prophecy, and understand all mysteries, and all knowledge, and though I have all faith, so that I could remove mountains, and have not charity, I am nothing."
"Not he who has much is rich but he who gives much"
"Life is what happens to you while you are busy making other plans"
"I pity that man who wants a coat so cheap that the man or woman who produces the cloth shall starve in the process"
It's Time to Review Your Will
Is your Will as tax effective as it could be? In light of the recent inheritance tax changes you should consider reviewing your arrangements to make sure you are making full use of your nil rate bands, potentially saving your family thousands of pounds.
RNRB - Family Home Allowance
From 6 April 2017 a new form of nil rate band was introduced to “take the family home out of inheritance tax”. This new nil rate band is known as the Residence Nil Rate Band (RNRB). As special requirements must be met for the RNRB to be available to your estate you should consider reviewing your Will immediately to make sure you are making the best of the new tax rules.
What is the RNRB?
Before 6 April 2017 everyone had a nil rate band (NRB) of £325,000. This was the amount that they could give on their death before Inheritance Tax was payable. Married couples and civil partners have an extra advantage and may leave everything to their spouse or civil partner without using their NRB or paying inheritance tax. On the second spouses death they will then have their own NRB of £325,000 as well as their spouses NRB which may be transferred – so spouses and civil partners could give a maximum of £650,000 inheritance tax free.
The RNRB is a nil rate band which is additional to the NRB described above.
In 2020/21 it is £175,000 per person and it will increase in line with Consumer Prices Index (CPI) from 2021 to 2022 onwards. Any unused nil-rate band will be able to be transferred to a surviving spouse or civil partner.
The additional nil-rate band will also be available when a person downsizes or ceases to own a home on or after 8 July 2015 and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants.
The RNRB means that for a couple their home valued at up to £1,000,000 can be passed to their children free of IHT. However, this depends upon the terms of your Will and this may be a time to review it.
How Do I Qualify?
SPOUSES AND CIVIL PARTNERS COULD GIVE A MAXIMUM OF £650,000 INHERITANCE TAX FREE
Have There Been Any Other Tax Changes I Should Consider?
If your Will includes a ‘Nil rate band discretionary trust’ then you may need to review your arrangements to ensure you have a tax effective Will. A nil rate band discretionary trust is a form of trust that will only take assets up to the value of one NRB (£325,000). This was a common arrangement between spouses and civil partners prior to 2007 where the NRB could NOT be transferred on the surviving spouse’s death because it allowed the first to die to use their NRB. Since October 2007 a spouse or civil partners NRB has been transferable, meaning this type of arrangement is less tax effective than it used to be. There are still other reasons for using this type of trust, so seek professional advice on whether yours is still required.
Reasons you might review your Will:
1. Changes in Tax Law
2. Introduction of the RNRB - Residential Nil Rate Band
3. Birth of a child or grandchild
4. Change of address
5. Change of executors/trustees
8. Receiving an inheritance
9. Any other material change in circumstance
You should review your Will every 3-5 years and always store it safely
Contact Society of Will Writers Member - Alan Moran
Readers should not rely on, or take any action or steps, based on anything written in this guide without first taking appropriate advice. Interface Financial Planning Ltd cannot be held responsible for any decisions based on the wording in this guide where such advice has not been sought or taken.