The Finance Act 2006 introduced major changes in inheritance tax. The new Government measures are extremely complicated and have a wide impact on the whole field of Wills, estates and trusts. These new rules will not only affect new trusts but also estates and Wills which have been in existence for many years.

Under present Inheritance Tax legislation the first band of your assets (the nil-rate band) passing to your beneficiaries is tax free. Above that, Inheritance Tax is chargeable at a flat rate of 40%. This is subject to various exemptions, the most important of which cover assets which pass to your spouse, business assets as already mentioned, and bequests to charity.

In the case of a husband and wife, each of them has a nil-rate band. We have devised arrangements acceptable to the Capital Taxes Office so as to maximise the use of the nil-rate bands, with the possibility of making substantial savings of Inheritance Tax on the death of both spouses.

We will also discuss with you whether action can be taken during your lifetime to avoid the Inheritance Tax which would otherwise be payable on your death. There are a variety of arrangements which we commonly use successfully for many of our clients and we will be pleased to discuss these with you in more detail.

Most people have life and pension policies and usually pension policies include death benefits in case you die before reaching pension age. Sometimes the amounts payable under these policies and death benefits can be as big as the rest of your estate or greater.

In addition, if you should die before retirement, these benefits can usually be paid out to your heirs free of Inheritance Tax, which makes them even more valuable.

It is essential that the arrangements for dealing with these should be integrated with the other provisions in your Will. We will suggest a review of your policy documents to check whether they have been written in trusts or not and to ensure that policy benefits are treated in the most tax-effective way possible and directed to the right beneficiaries.