Married and Civil Partners with estates likely to have Inheritance tax liability

The CTT Group recommended solution for married or civil partner clients with estates likely to have an inheritance tax liability utilises separate discretionary trusts, one for the Nil Rate Band amount and and one for the excess above the Nil Rate Band amount. This second trust has an Interest in Possession in favour of the surviving spouse or civil partner. This allows spousal exemption from inheritance tax to apply to the estate and so there would be no inheritance charge on first death.  

Clients are likely to have an Inheritance tax liability if their combined estates are valued at more than two Nil Rate Bands (currently £325,000 x 2).  However, even if clients are currently below this threshold, it is always worth considering the possibility of future growth to their estates particularly when dealing with younger clients and so this planning should be recommended where clients’ estates are likely to exceed the NRB thresholds in the future. This will help future proof their planning. 

Depending on the asset types you may want to consider the use of further trusts, most notably Business or Agricultural trusts, Pension Death Benefit trusts and Life Assurance trusts.  

Please see the video below and the explanation sheets to understand the planning. The trust names differ if you are using pilot trusts or trusts within the will but they are equally effective to achieve the desired results.