Inheritance Tax Threshold
As you may have seen in the media recently, the new Residence Nil Rate Band (RNRB) which is due to be implemented over the 5 year period ending 2021, will result in married couples or civil partnerships having an Inheritance Tax free allowance of up to £1m.
Sadly this is not likely to be the case unless you meet all the various stringent requirements.
The extra allowance will only be available if you are passing property to direct descendants such as your children or grandchildren but only if they inherit outright. If the share due to the beneficiary is to go into a trust until the age of 25, for instance, the property will not attract the RNRB if the beneficiary is below that age on your death.
The property itself has to have been your main residence at some point in your life. It does not necessarily have to be the one you are living in at the date of your death. But the extra allowance available would be capped at the value of the property or the value of the equity available were there to be a mortgage outstanding.
A property that has never been your residence, such as a buy to let property, will not have the residence nil rate band available to it.
Also the RNRB will only be available on one property . This being the case your personal representatives will be able to elect which property to which the allowance should relate. However, it is going to be possible to claim the RNRB where a person has disposed of a residential property on or after 8 July 2015 either completely or by downsizing to a smaller property.
This legislation is complex and we would suggest that you consider having an appointment to discuss your existing Will, or a new Will, to ensure that you have a suitable provision in place to take advantage of the tax allowances available and ensure that your chosen beneficiaries benefit as much as is possible.
If you would like to discuss this legislation and what it will mean to your estate, do get in touch.