Severing a joint tenancy * how to avoid paying inheritance tax * nil rate band discretionary trust wills * severing a joint tenancy to prevent paying inheritance tax

Sounds painful but severing a joint tenancy is painless and the best way to avoid paying inheritance tax. This actually involves a nil rate band discretionary trust Will, which is no surgical and bloodless but necessary if you don't want to end up paying inheritance tax when you die.

SEVERING A JOINT TENANCY

If you want to take advantage of the savings in inheritance tax that can be made by using nil rate band discretionary trust wills, you will need to make sure that you and your spouse/partner own your house as tenants-in-common rather than as joint tenants.

All sounds a bit down market as you own your own house and never considered yourselves as tenants but this is just legal jargon.

Usually, most properties that are owned by two people are owned as a joint tenancy. This means that each of you jointly owns the entire property. So when one of you dies, the entire property automatically passes to the surviving partner. This is nice and simple but not an ideal situation if you want to leave your half of the house to a nil rate band discretionary trust, which is what you will need to do for the purpose of avoiding inheritance tax.

HOW TO AVOID PAYING INHERITANCE TAX

So, before you can utilise a nil-rate band discretionary trust you and your spouse or partner will need to sever any existing joint tenancy and become tenants-in-common instead. Sounds even more down market but it is just legal jargon.

Being tenants-in-common means that you and your partner will each own a distinct 50% share in the property, and you will be free to do whatever you want with your share in your will - in this case specifying that some or your entire share passes to a nil-rate band discretionary trust.

This is not like a divorce where the house is split 50/50 and the wife gets the inside and the husband gets the outside. This is simply a legal exercise to ensure you are both equal owners with distinct shares.

The inheritance tax planning and will writing specialists that we work with will be able to arrange for your joint tenancy to be severed as part of the service they provide. To find out more, please complete our no-obligation enquiry form.