The Inheritance Tax announcement yesterday by "Chancellor" Darling is misleading. It has the flavour of a Gordon Brown dodge - hence my inverted commas.
The threshold per person remains at £300,000, as this article by Labour Home itself explains. What has changed is that the allowance is transferable on death, if you are married or in a civil partnership.
A similar effect would previously have been achieved by any competent solicitor, will writer or estate planner, by including a Nil Rate Band Will Trust in your Will. Similar, but not quite the same: the Nil Rate Band trust means giving assets away to a third party (not to one's partner) after the first death. Making the allowance transferable lets the surviving partner enjoy the use of assets worth up to £600,000, without the threat of estate tax afterwards.
This will reduce the amount of tax raised from IHT, since it helps those who a) haven't written the right kind of will/trust arrangement or b) couldn't do so because of the continuing needs of the surviving partner (who might, for example, be disabled or in a privately-paid nursing home).
But it's certainly not what it sounded like, which was an IHT allowance of £600,000 per person, or £1.2 million altogether.
Thanks to Dizzy Thinks and The Spectator Coffee House blog for the alerts.
The threshold per person remains at £300,000, as this article by Labour Home itself explains. What has changed is that the allowance is transferable on death, if you are married or in a civil partnership.
A similar effect would previously have been achieved by any competent solicitor, will writer or estate planner, by including a Nil Rate Band Will Trust in your Will. Similar, but not quite the same: the Nil Rate Band trust means giving assets away to a third party (not to one's partner) after the first death. Making the allowance transferable lets the surviving partner enjoy the use of assets worth up to £600,000, without the threat of estate tax afterwards.
This will reduce the amount of tax raised from IHT, since it helps those who a) haven't written the right kind of will/trust arrangement or b) couldn't do so because of the continuing needs of the surviving partner (who might, for example, be disabled or in a privately-paid nursing home).
But it's certainly not what it sounded like, which was an IHT allowance of £600,000 per person, or £1.2 million altogether.
Thanks to Dizzy Thinks and The Spectator Coffee House blog for the alerts.
6 comments:
Thanks for the explanation- I hadn't been studying the detail so that was useful!
Welcome, Gracchi - and what a chi-chi, erudite byline you have!
What does your thesis set out to show?
"the Nil Rate Band trust means giving assets away to a third part"; no, not quite. It means setting up a trust with beneficiaries you choose - no doubt your widow, children, grandchildren and so on. Moreover, if the assets going into the trust are mainly money - as opposed to an IOU for your half of the house - then the growth of those assets will also be free of IHT. Whereas if you don't set up a trust, the growth will end up in your widow's estate and be whacked for IHT. And pillaged by social services to pay for your widow's nursing home. The remains pass to your children, no doubt, so that a child-in-law can nick them in a divorce. No lawyer I, but I'll be setting up a nil rate band trust. It also gives you some defence against a future government changing things again.
Dearieme: sure, it's just that in that case the trust is the third party. I also agree that you can't trust the government, which is one reason why people have to think carefully before putting a lot into pensions.
useful data
Thank you, Lady M., and welcome.
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