Many couples were advised to include a trust within their wills, however, when the transferrable nil band rate was introduced in 2007, these became unnecessary and it is advisable to contact a professional to discuss the best course of action in light of this. If you`re considering closing a discretionary trust contact IWC for tax advice on 0800 612 6105, open until 10pm, 7 days a week.
Does Your Will Include a Discretionary Trust Clause?
If you are married, made your Wills prior to October 2007 and at that time your estate was considered to be over the nil rate band (£298k), there is a good possibility that your will included a Discretionary Trust. If this is the case, changes in the law mean you need to reconsider your estate plans.
In Oct 2007 the government introduced what is known as the transferable nil rate band.Simply, a married couple can now transfer their inheritance tax free allowance to each other so that on the death of the second spouse the estate would benefit from 2 tax free allowances.
Wills which included the discretionary trust clauses generally transferred the first person`s nil-rate band to a trust thus maximising the allowances at the time. If you do not update your will or review your estate plan, it may be that if you were to die the trust would need to be closed. The cost of closing a trust, which is automatically set up the moment you die, is far more expensive than redrafting your will.
It must be done within 2 years of death but not before 3 months after death. Then, the Inland Revenue will accept that the second persons estate would still qualify for the double nil rate band allowance. It is treated as though the assets had been left outright to the survivor under the will.
If the second spouse to pass away were to live another 20 years after the first spouse passed, there is a very real chance your estate would now pay more tax if the trust was implemented. Therefore closing a discretionary trust may be in your best interest.
IWC Can Help
In cases where the change in law has meant you have an unnecessary nil rate band discretionary trust, IWC can assist you by either including a codicil to remove the applicable trust clause or drafting a new will which excludes the trust. If you`re considering closing a trust, IWC can offer help and advice with tax implications.
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No Obligation Advice - Call us now on 0800 612 6105 for free legal assistance in relation to closing a discretionary trust.