Ashfords Solicitors - Changes to IHT & CGT

This is true but for many couples this is nothing new as they already have a nil rate band discretionary trust within their wills. The question is whether such wills should now be reviewed and replaced with simple wills ?

The following points should be considered :-

1. At this stage the finer details of the changes to IHT have not been published or analysed. It would be prudent to wait and see before rushing through any changes. For instance, what happens if the surviving spouse remarries ?

2. In many estates, the presence of investment property or business assets offers the possibility for these assets to be put into a Discretionary Trust on the first death. The value of these assets could well increase faster than the Chancellor raises the IHT threshold in the future. In such cases it would be advantageous to retain the present nil rate band arrangement.

3. With most nil rate band will arrangements the assets are effectively loaned, after the first death, to the surviving spouse.This loan can be on such terms as the trustees and spouse agree. The method for calculating interest could therefore be based on house price inflation which again could see faster growth than the nil rate band.

4. Clients are concerned not only with tax but also with protecting assets for their children. A discretionary trust arrangement offers protection in this regard.

Therefore it is premature to consider changing such wills. Once the position becomes clearer change may or may not be required but it is too early to say.

Capital Gains Tax

CGT looks set to be charged at a flat rate of 18% from the 6th April 2008. If an individual holds assets which qualify for business taper relief in full then the effective rate of CGT is currently 10%. Anyone considering a sale in the near future should therefore consider completing this before next April or alternatively transferring the assets to a Trust in which they are self interested. This will trigger the disposal but the rate will be 10% not 18%. The Trustees will then sell but their base cost will be the value on the date of the Trust so the asset is unlikely to have increased in value.

Our team are happy to discuss any of these changes with you.

Ashfords is regulated by the Solicitors Regulation Authority. The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.

9th November 2007

Key Contacts

Changes to IHT & CGT

Introduction