IHT planning

[tmgor59]

I would appreiciate any advise on IHT tax planning.I and my wife own a house as home and 4 flats on rental. approx. value of all properties around £850000. I would like to know if there is a type of will which can be drawn so that assets are passed to our two sons without incurring IHT.
Thankyou for any replies.

[Convenient Wills]

Hi TMG.
Avoiding IHT in its entirity on an estate valued at £850k is unlikely through the use of 'normal'IHT discretionary trusts contained within a will. Many married couples have 'mirror wills' that simply gift all their estate to their surviving spouse on first death - and thus loose the 1st person's zero IHT allowance of £275000. By splitting jointly owned property into two individual parts and the inclusion of IHT discretionary trusts clauses in your will, it is possible to use the 1st persons allowance. These trusts can save £110,000 of IHT (tax year 2005-6). Matters are complicated with 'Gift with Reservation' rules - overcome with IOU Discretionary Trusts. You need to be aware of the potential restrictions imposed on the surviving spouse. These trusts clauses need to be used in conjunction with other tax planning.

Hope the above helps.

[Anthony Nixon]

TMG have a look at my Tax Doctor article - number 33 which sets out the best approach to this problem. By using "Double trusts" in both spouses' wills the IHT saving can be significantly more than £110K.

Anthony Nixon
Partner
Lester Aldridge Solicitors
Alleyn House
Carlton Crescent
Southampton
SO15 2EU

Tel: 023 8082 0442
Mob: 07881 920742
Fax: 023 8082 0441
Email: anthony.nixon@la-law.com
Website:www.lester-aldridge.com