The following Trusts and Inheritance Tax guidance note Produced by Tolley in association with Emma Haley at Boodle Hatfield LLP provides comprehensive and up to date tax information covering:
Before October 2007, it was standard practice for married couples with estates large enough for inheritance tax to be an issue to include nil rate band discretionary trusts (NRBDTs) in their Wills. Otherwise, it was difficult for both spouses (which term is used here to include civil partners) to use up their nil rate bands (NRBs). This was because:
if the first spouse died leaving the whole of his or her estate to the other, there was no inheritance tax to pay because of the spouse exemption
however, the first spouse to die had ‘wasted’ his NRB, because the combined estate would be taxable on the second death, but with the benefit of only one NRB (ie that of the second spouse to die)
The NRBDT was a useful device which enabled the first spouse to die to use his nil rate band yet still provide for the survivor to benefit from the assets via a discretionary trust.
The arrangement works as follows:
the Will of each spouse contains a discretionary trust of assets to the value of the available NRB at the date of death. The trust only takes effect on the death of whichever spouse dies first. The beneficiaries typically include the surviving spouse and children / other family members. The remainder of the estate of the first spouse to die (the
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