Generational Planning: Do you qualify for an inheritance tax saving? | AAG Wealth Management

Generational Planning: Do you qualify for an inheritance tax saving?

Posted: March 10, 2016

Have you, your spouse or either of your parents been widowed? If so, Stephen Fenton, Chartered Wealth Manager at AAG, explains there could be a significant tax saving.

“If either party to a second marriage has been widowed from a previous marriage, it may present the opportunity to reduce exposure to Inheritance Tax.

Let’s look a situation where Nigel and Sophie are married, Nigel’s first wife died 10 years earlier and she did not use her Nil Rate Band (currently £325,000). If Nigel dies first, his first wife’s unused Nil Rate Band can be claimed providing a total nil rate band £650,000. If however Sophie died first, it would not be possible to take advantage of Nigel’s first wife’s Nil Rate Band.

There is a way to circumvent this and take advantage of 3 Nil Rate Bands.

If Nigel gifted £325,000 into a discretionary trust with his wife and family as beneficiaries, his first wife’s nil rate band could be applied against this. If Nigel then died first, his Nil Rate Band has not been used.

If Sophie’s Will provides for an amount matching the Nil Rate Band to go into a discretionary trust, with the remainder to Nigel and she then dies first, upon Nigel’s death, his executors could use his first wife’s Nil Rate Band, plus his own.

No matter who died first, the family would be able to benefit from 3 Nil Rate Bands.”

 

The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.

Advice relating to Wills and Discretionary Trusts would necessitate the referral to a service that is separate and distinct to those offered by St. James’s Place.