Cut the Taxman out of Your Will; Look at the Options: Expert Leonie Kerswill Recommends Downsizing Relief: Peter and Vivien Shoesmith Have Redrafted Their Wills
Byline: STEPHEN WOMACK
A generation of property-rich pensioners is desperately looking for themagic weapon to slay the dragon of inheritance tax. Rising house prices haveswollen the Government's take from IHT from [pounds sterling]3.3 billion in 2005 to anestimated [pounds sterling]4 billion this year. The property price boom is dragging an extra50,000 homes a year - almost 137 a day - into the IHT net, according to HBoS.
In the past older homeowners could gift their home to their family and carry onliving there. But the Govern ment has targeted this tax loophole. LeonieKerswill, tax partner at accountant PricewaterhouseCoopers, says: 'This is onearea that has been hit by the Government and it is difficult to have your cakeand eat it on gifting property now.' But with careful planning, a marriedcouple can pass on a property worth up to [pounds sterling]600,000 without paying a penny inIHT.
Andrew Priestley, head of technical advice at Skipton Financial Services, whichprovides specialist IHT planning advice, says: 'It pays to start thinking aboutthis as soon as possible and the best ways to reduce a potential bill usuallyapply to couples.' Dean Mirfin of adviser Key Retirement Solutions says: 'We'reseeing quite an increase in this area. More than 60 per cent of the clients wesee, who have an average age of 69, do not have a will. There is ample scopefor inheritance planning.' The first [pounds sterling]300,000 of an estate is free from IHT.This nil-rate band rises to [pounds sterling]312,000 next year and the Government has pledgedto raise it to [pounds sterling]350,000 by 2011.
Under normal circumstances, most people leave all their wealth to the survivingspouse on their death. But this effectively wastes one nil-rate band.
Priestley says: 'You can draft a will that creates a trust on your death.Assets up to the nil-rate band, which can include a share of your property, canbe left to the trust. It costs about [pounds sterling]500 to draft a pair of wills, but thepotential tax saving this year is [pounds sterling]120,000.' To include the house in a trust,couples must own the property as tenants in common, which mean each owns halfthe home. Transferring to tenancy in common from the more usual joint ownershipis a simple legal process costing between [pounds sterling]100 and [pounds sterling]150.
Peter and Vivien Shoesmith redrafted their wills earlier this year, taking thechance to create nil-rate band trusts. The couple, from Fleet, Hampshire, haveseen the value of their four-bedroom detachedLook at the options: Expert Leonie Kerswill recommends downsizing home rocketfrom [pounds sterling]11,000 when they moved there in 1970 to well over [pounds sterling]400,000 today. …