How Leeds property owners can maximise new inheritance tax allowances
Property owners in Leeds who want to ensure the best possible provision for loved ones after their deaths should check whether changes to the Residence Nil Rate Band (RNRB) allowance require them to alter their wills.
The advice comes from Michele Todd, partner and inheritance specialist with hlw Keeble Hawson which has offices in Doncaster, Sheffield and Leeds, who warns that wills must be reviewed regularly to maximise benefits brought by changes to succession law.
She said: “The new RNRB allowance is a prime example. It gives extra tax relief to those with an estate, including a main residence, worth more than £325,000, which is the inheritance tax threshold – or nil rate band.
“The changes make some family homes exempt from inheritance tax and bring a number of new conditions for bequests that those making wills must know about.”
Additional nil rate bands when a residence is passed on death to a direct descendant began their phased introduction on 6th April – and will increase by £25,000 a year until 2020. However, the new rules come with strict definitions on who is a direct descendant of the owner.
They are a child, grandchild or other lineal descendant and a lineal descendant’s spouse or civil partner (including their widow, widower or surviving civil partner). Also entitled are a stepchild (someone whose parent is, or was, the spouse or civil partner of the will maker), an adopted child, a child who was fostered at any time and a child who the owner is the appointed guardian or special guardian when they’re under 18.
A property can’t go to nieces, nephews or siblings but may be left to a mixture of direct and non–direct descendants – with its RNRB value calculated on the share direct descendants inherit. In addition, to claim the allowance, the will maker must have used the home as their main residence at some time in their lives – buy-to-let properties don’t count.
Other conditions cover which trusts qualify for the allowance when property is included in them; how to protect RNRB when a will maker downsizes and sells the family home; and changing a will’s terms post-death to enhance beneficiaries’ entitlement.
Michele Todd concluded: “Always remember that it is far better to get the will right at the outset, then keep up with regulations on tax-efficient inheritance so that it can be adapted to new rules.
“This is a complex task – and your own altered circumstances might also require changes to your bequests – so it is a very good idea make periodic inheritance ‘check ups’ with a specialist legal adviser part of your succession planning.”