It does mean that many people who had Nil Rate Band Inheritance Trust Wills written need to have them examined as they could be potentially be worse off by having them.

The way some of these Wills are written means that on first death from the couple the Nil Rate band is used to transfer money into the Nil Rate Band Trust. If the second partner from the couple dies some years later they may not benefit in the uplift of the nil rate band allowance.

This is quite complicated but if the first partner died in 2007 and the Nil Rate Band Trust was in acted then the second partner died in 2010 they total IHT free allowance could have been £700,000 but if the IHT Will transfers the nil rate band in force at the time of first death they would have used 100% of the nil rate band allowance and thus only achieve a total of £650,000, free of inheritance tax. The longer the period between the first partner dyeing and the second partners death the bigger this gap will get.

If you are married or in a civil partnership you should consider either updating your wills or writing wills to include an asset protection trust to help protect a portion of the estate from potential care cost assessment, if you should need to go in to longer term care after the death of the first partner from the couple. Where as inheritance tax could only be applied at 40% on assets over the £300,000 nil rate band if you need long term care the local authorities could drain all of your assets down to a value of £13,000 a much bigger threat.

Adrian
gb-legal.com