How to Protect Your Estate and Pass on More to Your Loved Ones
Inheritance Tax (IHT) can significantly reduce the amount your family inherits when you pass away. However, with expert planning, it’s possible to minimise the tax burden on your estate.
At Harold G Walker Solicitors, we help individuals and families navigate the complexities of Inheritance Tax, ensuring that their wealth is passed on as efficiently as possible. By making full use of tax allowances and structuring your estate correctly, you can protect your assets and reduce unnecessary tax payments.
How Inheritance Tax Works
Each individual has a Nil Rate Band (NRB) of £325,000. This means that if your estate is worth less than this amount, no IHT is payable. However, any assets above this threshold are usually taxed at 40%.
Maximising Tax-Free Allowances for Couples
If you are married or in a civil partnership, you can leave your entire estate to your spouse tax free. Additionally, any unused Nil Rate Band can be transferred to your surviving partner. This means that on the second death, the total tax-free threshold could be £650,000.
What Happens If You Have Been Widowed More Than Once?
If you have been widowed more than once, you may be entitled to claim unused tax allowances from more than one late spouse. However, the total amount of Nil Rate Band that can be transferred cannot exceed 100% of the current Nil Rate Band at the time of your death.
Example Scenario:
– Elizabeth was married to Harold, who passed away having used 50% of his Nil Rate Band. This means 50% was unused and available to transfer.
– She later married Michael, who passed away having used 30% of his Nil Rate Band, leaving 70% unused.
– Upon Elizabeth’s death, her estate can claim the unused portions from both late spouses, but the total transferable allowance is capped at 100% of the Nil Rate Band at her death. If the Nil Rate Band remains at £325,000, this would give her estate a total tax-free threshold of £650,000.
The Residence Nil Rate Band (RNRB): An Extra Tax-Free Allowance
In addition to the standard Nil Rate Band, an extra allowance known as the Residence Nil Rate Band (RNRB) is available when passing on a residential property to direct descendants (such as children or grandchildren). The RNRB is currently £175,000 per person.
As with the standard NRB, this allowance is also transferable between spouses, meaning that on the second death, an estate could potentially benefit from:
✅ £650,000 Nil Rate Band
✅ £350,000 Residence Nil Rate Band
✅ £1 million tax-free in total
Key Considerations for the RNRB:
– The property must be left to direct descendants (children, grandchildren, stepchildren, etc.).
– If the estate is valued over £2 million, the RNRB is gradually reduced by £1 for every £2 above this threshold.
–If both partners have been widowed before, it may be possible to claim up to four RNRBs (capped at £350,000), ensuring the estate claims the maximum tax-free threshold available.
How Harold G Walker Solicitors Can Help You
Effective Inheritance Tax planning isn’t just about reducing tax, it’s about ensuring your assets are distributed according to your wishes while making full use of legal tax reliefs. At HGW Solicitors, we provide specialist advice to help you make the most of the allowances available to you.
We can assist with:
✔ Drafting and updating Wills to ensure your estate is structured tax-efficiently
✔ Estate administration to ensure all tax reliefs are applied correctly
Planning for the future means taking steps today to protect your estate and maximise what your loved ones inherit. We are here to guide you through the Inheritance Tax planning process with clear, practical advice tailored to your personal circumstances.