Nil rate band will trust

The aim of the trust is to ensure that both IHT nil-rate bands for husband and wife are used, whilst providing financial protection for the survivor after first death. If the whole of the estate of the first to die passes to the survivor, all of the value in excess of the nil-rate band when the survivor dies will be subject to IHT, currently at a rate of 40%

The main features of these Wills are:-

  • On 1st Death assets to the value of the nil rate band at the time are transferred into a discretionary trust, established in the terms of the Will.
  • The beneficiaries of the trust, who can benefits at the trusteesí discretion, usually include the surviving spouse, children and remoter issue.
  • The residue of the estate in excess of the nil rate band usually passes to the surviving spouse.
  • The survivor can benefit from either capital or income of any assets held in the trust.
  • If preferred, by use of the IOU provision, all assets can pass to the survivor in exchange for an IOU or charge over the property, which is then retained as a trust asset.
  • The trustees also have the powers to lend to the survivor.
  • As it is a discretionary trust, on death of the survivor, the trust assets are not included for the purposes of calculating the IHT due.
  • If the IOU or charge or loan is used, this is deducted from the survivorís estate before the IHT is calculated.
  • Survivorís estate has its own IHT exemption
  • Result is that both IHT nil rate bands are used, currently giving £650,000 of the estate free of IHT