How many times can you use your IHT Nil Rate Band ?

The answer is simple. How many years will you live divided by 7.

Whilst, for many people,they may never need to utilise more than one nil-rate band (currently £325,000.00) to avoid IHT or £650,000.00 for a married couple or civil partners utilising the transferable nil rate band, there are, of course, a number of people whose assets will exceed the limits set by one IHT nil rate band.

The good news is that with appropriate IHT planning you can fully use your IHT nil rate-band at any time of your life by making an appropriate gift, often into trust, of the current nil-rate band. If you then live another 7 years, the slate is wiped clean and you can start again utilising the then current nil-rate band, as applicable.

As an example, if you take a married couple who are both currently 70 years old, their current acturial life expectancy will be 15.2 years (man) and 17.7 years (woman). On the assumption that this couple has significant assets at the age of 70 and lived their acturial lives, you will see that it is possible for them to gift tax-free three IHT nil-rate bands.

Even on the assumption that the IHT nil rate band remained fixed at £325,000.00, this would potentially save £780,000.00 of inheritance tax as follows:-

1. Gift at age of 70 - £325,000.00 x 2

2. Gift at age of 77 - £325,000.00 x 2

3. Gift of IHT threshold on death of survivor (over 84 years) - £325,000.00 x 2

As you will note, the total of the gifts made within the IHT thresholds equates to £1,950,000.00, The rate of tax is 40% and thus this creates the saving of £780,000.00 IHT, in this example.

Evidently, this post, sets out good reasons to carefully consider IHT planning from an early age,

If appropriate. I am aware of a number of innovative financial products whereby gifts can be made into trust and utilise the full IHT nil-rate band applicable whilst still allowing the donor to retain a substantive income and/or capital from the same.

Dealings with such products are, of course, properly regulated by the FSA and outside my ambit of regulation, I am, however, very happy to recommend specialist IFA's who deal with this type of product, on request.

Comments

[leeds solicitors]

This is very interesting.

Thanks so much, this will be very useful for my research.