Inheritance Tax Residence Nil-Rate Band (RNRB)

Passing on your wealth in the right way is key for its preservation

The rise in property prices throughout the UK means that even those with modest assets may exceed the £325,000 Nil-Rate Band (NRB) for Inheritance Tax. On 6 April 2017 the Residence Nil-Rate Band (RNRB) band came into effect. It provides an additional nil-rate band where an individual dies after 6 April 2017, owning a residence which they leave to direct descendants.

Where theres a Will theres a way

Don’t leave considerable costs and complications, alongside the heartache of grieving

If you want to be sure your wishes are met after you die, then it’s important to have a Will. A Will is the only way to make sure your money and possessions that form your estate go to the people and causes you care about.

Bare Trust

Held for the benefit of a specified beneficiary

They’re also known as ‘Absolute’ or ‘Fixed Interest Trusts’, and there can be subtle differences. The settlor – the person creating the Trust – makes a gift into the Trust which is held for the benefit of a specified beneficiary. If the Trust is for more than one beneficiary, each person’s share of the trust fund must be specified. For lump sum investments, after allowing for any available annual exemptions, the balance of the gift is a potentially exempt transfer for Inheritance Tax purposes. As long as the settlor survives for seven years from the date of the gift, it falls outside their estate.

Discretionary Trust

Wide class of potential beneficiaries

With a Discretionary Trust, the settlor makes a gift into Trust, and the trustees hold the trust fund for a wide class of potential beneficiaries. This is known as ‘settled’ or ‘relevant’ property. For lump sum investments, the initial gift is a chargeable lifetime transfer for Inheritance Tax purposes.

Flexible Trusts with default beneficiaries

Discretion over which of the default and potential beneficiaries actually benefit

These are similar to a fully Discretionary Trust, except that alongside a wide class of potential beneficiaries, there must be at least one named default beneficiary. Flexible Trusts with default beneficiaries set up in the settlor’s lifetime from 22 March 2006 onwards are treated in exactly the same way as discretionary trusts for Inheritance Tax purposes.

Split Trusts

Family protection policies

These Trusts are often used for family protection policies with critical illness or terminal illness benefits in addition to life cover. Split Trusts can be Bare Trusts, Discretionary Trusts, or Flexible Trusts with default beneficiaries. When using this type of Trust, the settlor/life assured carves out the right to receive any critical illness or terminal illness benefit from the outset, so there aren’t any gift with reservation issues.

Lasting Power of Attorney

Taking control of decisions even in the event you can’t make them yourself

A Lasting Power of Attorney (LPA) enables individuals to take control of decisions that affect them, even in the event that they can’t make those decisions for themselves. Without them, loved ones could be forced to endure a costly and lengthy process to obtain authority to act for an individual who has lost mental capacity.

Care in later life

Making the difficult choice between live-in care and a care home

One of the biggest challenges of the 21st century is Britain’s ageing population. As later-life care becomes more prevalent, whether you are considering this for yourself or a relative, covering the costs involved can be significant.

Future financial health

Taking the time to take back control over retirement savings

With all that has been going on in the world this year, for many people it’s been really difficult to feel as though they’re in control of much. However, some people have been in the fortunate position of being able to take the opportunity to invest in both their physical and emotional health while in lockdown.