Did you know that your estate can now benefit from a new Inheritance Tax exemption?
The new IHT Residence Nil Rate Band (RNRB) is in addition to an individual’s own Nil Rate Band, currently £325,000. The new RNRB is currently £100,000 and will increase by £25,000 each tax year until 2020/21. This new exemption will only apply to you if you own your own home, and are leaving it to your direct descendants.
In the same way that the current Nil Rate Band is transferable between spouses and civil partners on death, the RNRB will also be. For example, when combined with the full RNRB of £175,000 in 2020/21 this would provide a married couple with a possible £1,000,000 nil rate band if they left their estate to each other on the first death and then on the second death to their children.
The RNRB will be reduced by £1 for every £2 that the deceased’s net estate exceeds £2,000,000. This will mean that on its introduction there will be no RNRB available if the deceased holds assets of more than £2,200,000. This will rise as the RNRB rises.
Depending on your circumstances by April 2020 there will be a possible total £1,000,000 nil rate band available. The RNRB may be lost where the property is placed into a discretionary will trust for the benefit of the children or grandchildren. However, if a trust gives a child or grandchild an absolute interest or interest in possession in the home the RNRB can still be claimed.
The law is ever-changing and what was applicable when you made a Will say ten years ago may not now be the best way to leave your estate it is good practice to review your Will on a regular basis to ensure that it carries out your wishes and makes the best use of the tax exemptions available to you and your estate.
If you would like to speak to us about your Will or indeed to review the current provisions please do not hesitate to contact us at the Lymington Office on 01590 689500 or at New Milton on 01425 610078.