Many people have Discretionary Trusts in their Wills and there can be a number of reasons for this, including:
- Adding flexibility and protection for inheritance by family members.
- Providing for vulnerable beneficiaries whilst protecting their entitlement to means tested benefits.
- For Wills made prior to 9 October 2007, to save Inheritance Tax.
In this latter example, this type of Trust was usually called a Nil Rate Band Discretionary Trust and served to ensure that married couples could take advantage of both of their Inheritance Tax allowances (currently totalling £650,000) which, prior to October 2007, could only be done by us using this type of Trust.
The Government is now introducing an extra Inheritance Tax allowance for people who leave their main home to their direct descendants (i.e. children/grandchildren). For each individual this will start at £100,000 in tax year 2017/18 and will reach £175,000 by tax year 2020/21.
This extra allowance has various conditions attached to it so, to ensure that your current arrangements qualify for it, you should take advice.
One point to note, which could affect people with Discretionary Trusts in their Wills, is that the extra allowance is not granted on assets that pass into this type of Trust. There are other types of Trusts that can be used in Wills which do qualify for the extra allowance and your solicitor will be able to talk you through your options in relation to these, if necessary.
If you leave the Discretionary Trust in your Will without taking advice, you could find that your estate has a higher Inheritance Tax liability on your death than it would otherwise have had.
How can Nelsons help?
For more advice or to comment on this article, please contact a member of our expert Wills, Trusts and Probate team in Derby, Leicester or Nottingham on 0800 024 1976 or via our online form.