You may remember the Government’s promise to increase the inheritance tax threshold for a married couple or Civil Partnership to £1,000,000. This has now been introduced since April 2017 on an incremental basis by way of an extra inheritance tax allowance based on the value and disposition of your Home under the terms of your will.
Under the current law, each individual has a current inheritance allowance of £325,000. You now have a potential extra allowance of £125,000 each (if you die in the 2018/19 tax year) rising to £175,000 for the 2020/21 tax year. So, if a surviving spouse dies after 6 April 2020 (with their allowance at £500,000) there is the potential for up to £1,000,000 (their allowance and their late spouse’s) of their estate to be exempt from inheritance tax.
Naturally there are various rules and regulations that have to be met in order to be eligible for this extra allowance. The main one is that your Home is left (under your will) to a direct descendant. This includes adopted children and step-children.
Not every couple that live together with children are married or in a civil partnership. If a child with whom you live is your partner’s and you are not married then that child is not a direct descendant and cannot benefit from the extra allowance. It is possible that the law may change to take this into account but at present that is not the case. With careful will drafting, full allowances can be available.
Various other rules apply to trusts and children under 18 and situations where you may have sold your property and downsized or sold and decided to rent or go into a care home.
If you would like to discuss any of these matters further, please contact our private client department on 01392 285000 or E-Mail firstname.lastname@example.org