A recent client case highlighted a common oversight that could cost your loved ones dearly in Inheritance Tax (IHT).
I recently reviewed wills for a client and discovered the following…
The client, a sole owner of their main home, had left everything to her husband, who owned several rental properties. On death, the clients have left their estates to each other and then to their children.
The Problem: If the homeowner died first, their estate could claim the Residence Nil Rate Band (RNRB) – currently £175,000 – because they owned a main residence and were leaving it to direct descendants. However, if their spouse died first, the RNRB would be lost, potentially costing their children £70,000 in IHT (at 40%).
The Solution: Fortunately, we identified this issue and are writing fresh wills, including transferring ownership of the main residence into a “tenants in common” arrangement. This simple change will preserve the RNRB for their beneficiaries.
Key Takeaways:
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Equalising estates between spouses is crucial for tax-efficient estate planning.
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Ownership of the main residence plays a significant role in determining RNRB eligibility.
Don’t risk losing your RNRB. Contact me for a free review of your will or advice on how to create a tax-efficient plan that protects your loved ones.