Residence Nil-Rate Band – The “Million Pound Nil-Rate Band”, Part 223rd January 2017 5:30 pm Leave your thoughts
Over a year ago now, I asked about the Million Pound Nil-Rate Band, and you said to come back and ask again in 2017.
It’s 2017 now – so what about my Million Pound Nil-Rate Band?
Well, everything I said in my last article remains valid so, first of all, you should go back and read that again.
(If you have no idea what we are talking about, it may help if you go and read this first.)
If all that made sense, you can stop reading.
If it did not, read on – this should help.
Done that. So, what’s new?
Not much, in fact, except that the Residence Nil-Rate Band (RNRB) legislation is all in place now, so we know what we’re dealing with, even if it is ridiculously complicated and it will be some time before we see how it all works in practice.
For many people, making sure they qualify for as much of the new RNRB as possible will be the most significant thing they can do to reduce the Inheritance Tax on their estates.
Yes, but what do I need to do?
1 – Make sure you stay with us until at least 6th April 2017, when RNRB starts to kick in and, preferably, until at least 6th April 2020, when it reaches its maximum;
2 – go and see a solicitor who knows about this stuff, which really means a member of the Society of Trust and Estate Practitioners (STEP), the key international specialist body for people who are serious about this field.
I hate seeing solicitors. Why do I have to do that?
Because he or she will:
- carry out an Inheritance Tax calculation to see if RNRB or transferable RNRB are relevant in your circumstances
- make sure you don’t have anything in your Will which might stop your estate getting all the RNRB which might be available, which might be especially relevant if your Will already contains
- a gift of your residence, or part of it, or
- a gift to a trust, and
- if necessary, advise about using the right sort of trust when the first of you dies, to help keep the value of the estate of the last of you out of the ‘clawback zone’, again to ensure that your estate does not miss out on available RNRB.
OK, got it. You wouldn’t know where I can find one of these STEP members, would you?
I and my colleagues Rukhsana Hussain and Vickie Burdett are all STEP members, so that gives you three of us to choose from.
To make an appointment to talk about this, call any of us on 01628 631051.
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When you die, Inheritance Tax (IHT) is charged on the value of everything you own, except what you are leaving to your spouse (or civil partner) or to charity.
When the first of a married couple (or civil partnership) dies, most people leave everything to the survivor (who is exempt from IHT), so it is usually only when the last survivor dies, and the estate then passes to children or other family members, that IHT applies to the value of the estate.
The first £325,000 of that value is free from IHT. In fact, it is technically subject to IHT, but at the rate of a ‘nil’ percent, so it is called the Nil-Rate Band.
(Gifts you make within the seven years before your death can use up some or all of your Nil-Rate Band.)
What we are talking about here is a new and additional Residence Nil-Rate Band (RNRB), which relates specifically to the value of your residence or part of it, or the proceeds of sale of what used to be your residence, which you leave to your descendants.
This starts to apply to the estates of people who die after 5th April 2017.
In the right combination of circumstances, the Nil-Rate Band, the new RNRB and the rules for transferring unused Nil-Rate Band and RNRB between the estates of spouses (and civil partners) can result in the estate of the last surviving spouse or civil partner having a total nil-rate allowance of £1m.
If you are still with me and you still want to know more about Residence Nil-Rate Band, you should now go back to the beginning of this article and continue reading.
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This post was written by Colemans Solicitors LLP