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Inheritance Tax - Wills

A Will is a very important document as it directs how your wealth passes to your heirs. Used properly it can help save large sums of money from taxation.

It is advisable for each individual to make a Will in order to utilise their nil-rate band effectively. For married couples, it is worth considering bequeathing up to the nil-rate band to children/grandchildren rather than to each other. This can have a potential tax saving of up to £124,800 in 2008/2009 tax year.

Currently it is possible to alter Wills after death by means of a Deed of Variation.

This can be used for IHT purposes. For example, a parent inheriting assets might wish them to go to the children directly or a rich son might want his less welloff sister to have his inheritance. The Deed can work even if someone dies without having made a Will (Intestate).

The Deed has to be effected within two years of death. If the Deed is done for tax purposes the Inland Revenue Capital Taxes Office must be informed within six months of the Deed being set up. You cannot always set up a Deed of Variation and it may be that legislation may restrict the use of Deeds of Variation in the future.

In the absence of a Will, the Government will determine who inherits what.