Estate planning guidance

[ozzie11]

Hello, please can you give some guidance?

I am looking for some advice around estate planning / wills and probate.

Scenario: A married couple have 2 children, both over 18. The couple own a house in joint names. In addition, they have some other assets, but the total value of the house plus assets should be under £650,000.

If one of them passes away and there is no will, I understand their NRB will pass to the surviving spouse and there will be no IHT to pay. I understand the surviving spouse gets their NRB, so if the total estate value of both of them is under £650,000, then the estate will not have to pay IHT when the surviving spouse passes away (it is likely the children will inherit the total estate).

Is this correct?

If the house increases in value and the estate is valued at higher than £650,000 then I understand property allowance relief can apply, that allows a couple to leave up to £1 million in estate value, without IHT applying. So this means when the children inherit the estate under £ 1 million, there will be no IHT liability. In order to use the property allowance, will the couple have to make a will?

I have heard that there are financial advisors who specialise in estate planning who can advise on issues like this. Is that correct?

Would be grateful if you can confirm if my understanding is correct and if there is any guidance you can give around this area. Thank you.

[Pezza54]

Assuming you reside in England or Wales:

If a person owns property or assets jointly (such as property or bank accounts) then when they die, under the rules of survivorship these assets pass automatically to the surviving owner whether there is a will or not
If a person who is married or in a civil partnership leaves their property and assets to their partner in their will then spousal exemption applies and none of the £325k NRB is used up
When the surviving partner dies then their £325k NRB is added to their previously deceased partner's £325k TNRB giving a total £650k NRB.

Provided their property is left to a direct descendant in their will, then there is an additional maximum £175k RNRB available for each of the deceased, making a total £350K RNRB.
The total NRB plus RNRB is £1m

When a person does not leave a will the rules of intestacy apply. Under these rules the surviving spouse or civil partner receives all of the deceased's personal possessions, plus up to £322k of the remainder of their estate. Anything over £322k, the spouse receives 50% and the other 50% is shared equally between their children

RNRB applies under the rules of intestacy

Estate planning sounds great in theory, but when taxes, exemptions, allowances etc can be changed in a government budget, future financial planning requires a crystal ball. Ask the farmers

[Pezza54]

Assuming you reside in England or Wales:



Estate planning sounds great in theory, but when taxes, exemptions, allowances etc can be changed in a government budget, future financial planning requires a crystal ball. Ask the farmers

As an example, prior to October 2007, many couples paid for legal assistance to change ownership of their property from joint tenants to tenants in common and set up a trust to take advantage of both NRBs

Then in October 2007, when TNRB was introduced, many of the couples paid again to unwind these trusts

[ozzie11]

Thank you for your reply, much appreciated. Yes it is in England.
So in the above example, can the couple make the same will - both of them essentially leaving the estate to the other?

To keep things tidy and make a will, in order to use the RNRB, does the will have to say expressly they expect the estate to pass through to their children using the Property Allowance Nil Rate Band? Sorry if this sounds like a silly question but I just wonder if it has to be said expressly or does it feature automatically because there is a will.
Thank you.

[Pezza54]

Yes that is known as mirror wills

The wills must state their property is left to a direct descendant or descendants for RNRB to apply (no requirement to mention RNRB in the will). RNRB and TRNRB has to be applied for by the executor(s) completing the appropriate forms for HMRC. A list of IHT forms is provided in IHT400