Philip Bates & Co Financial Services has issued a stark warning to those who have included a discretionary nil rate band trust in their wills.
Changes introduced by the Government on 6th April means having done so may mean missing out on the new family home allowance.
We will now see the inheritance tax nil-rate band gradually supplemented with the new main resident nil-rate band – and trusts are excluded.
Only residential properties left to a ‘direct descendant’ can qualify for this new family home allowance.
Direct descendants include children, stepchildren, adopted and foster children and grandchildren, but not trusts.
The aim of the policy is to give an additional IHT allowance in addition to the usual £325,000 per person.
So, by the time the changes have been fully implemented in the 2020/21 tax year, a couple will be able to pass on a property worth up to £1 million free of tax.
But it has been suggested that the changes will affect hundreds of thousands of people who have established trusts as a way of limiting inheritance tax liabilities.
Alan Mellor said: “It is impossible to estimate exactly how many people this will affect, but our advice is to seek legal advice on your will without delay.”