Residence Nil Rate Band would appear to be important for saving on the amount of inheritance tax that a given party may have to pay on the value of their estate when they die. However, as Laura Richardson considers in her latest article, there is a need to proceed with caution when looking to utilise the Residence Nil Rate Band . . .

Everyone in the UK qualifies for the standard Nil Rate Band Inheritance Tax Relief which allows for any individual to pass on £325,000 worth of their Estate Inheritance Tax free! Inheritance Tax is applied to the portion of your estate that is worth more than this amount, and with the current rate of Inheritance Tax set at a flat rate of 40%, it is important for all UK residents to be aware of any further Inheritance Tax Reliefs that may be applicable!

One of the few widely available reliefs, known as the Residence Nil Rate Band relief, allows any UK resident a further potential £175,000 of Inheritance Tax relief if they leave their main residence to their direct descendants. This additional relief would potentially save your beneficiaries up to £70,000 in Inheritance Tax so it is well worth ensuring that you utilise the relief in the correct way!

Thankfully the conditions regarding the Residence Nil Rate Band relief are remarkably flexible in that your direct descendants could include your children, grandchildren, adopted children, foster children, stepchildren, or even the spouse or civil partner of a lineal descendant!

However, there is one pitfall that we at Andrew Douglas Wills & Legal Services have repeatedly seen that is voiding the ability for some people’s Estates to qualify for this seemingly straightforward additional Inheritance Tax relief.

You cannot utilise the Residence Nil Rate Bank relief for Inheritance Tax if your chosen direct descendants are set to inherit your main residence at any time other than immediately after your death. For example, if your Will states that your child’s inheritance will be placed in Trust on their behalf until they reach the age of 25 and you die when they are 21, the act of the main residence being placed in Trust breaks the chain of inheritance and the Residence Nil Rate Band relief does not apply!

Whilst Inheritance Tax reliefs are an excellent tool to help you to ensure that your beneficiaries receive the most possible from your Estate after your die, it is important to consult with an experienced Will-writing specialist such as Andrew Douglas Wills & Legal Services to make certain that your Estate would qualify, and to avoid common pitfalls that may render the relief void. For your peace of mind, and for added security for your loved ones, contact Andrew Douglas Wills & Legal Services today to arrange your free initial consultation!

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