Writing a Will * making a nil rate band discretionary trust Will * avoid paying inheritance tax * exemptions * writing a will to ensure your beneficiaries inherit your estate

Many people try to save a few pounds by writing their own Will and end up causing their relatives all manner of problems. How much does the average person know about nil rate band discretionary trust Wills to avoid paying inheritance tax. Most likely nothing and probably never even heard of them, but some people will buy a form in a newsagents and happily scribble their relatives into oblivion.

WRITING A WILL

Discretionary Trust Wills allow a married couple and civil partners to make use of the inheritance tax nil-rate band allowance of both spouses/partners, rather than just that of the surviving spouse.

To explain how this works, we'll use an example of a couple called Mr and Mrs Astley and we'll assume that Mr Astley is the first to die. However, the rules would be the same regardless of which partner died first.

We will also assume, for simplicity, that the inheritance tax threshold is at the current level of £300,000 at the time of Mr Astley's death and Mrs Astleys's death.

By the way, if you haven't already done so, you might find it useful to read this page about avoiding inheritance tax and the example of Mr and Mrs Barrow before you go any further.

NIL-RATE BAND DISCRETIONARY TRUST WILLS

Let's imagine that Mr and Mrs Astley each have an estate of £300,000. They wish to give everything to the surviving spouse when the first one dies, and on the second death they want everything to go to their children.

Because Mr and Mrs Astley are going to use nil-rate band discretionary trusts, they are going to avoid the £80,000 inheritance tax bill that Mr and Mrs Barrow's children had to deal with. This is despite the fact that the Astleys are worth £50,000 more than the Barrow's.

When Mr Astley dies, instead of leaving £300,000 in his will to Mrs Astley, he instead leaves it to a discretionary trust.

With the agreement of the trustees, Mrs Astley is able, if needed to borrow money or draw an income from the trust during the remainder of her lifetime. As a result, she is not left short of money and the marital home does not have to be sold.

You may choose your own trustees to ensure they have your spouse's interest at heart at all times.

When Mrs Astley dies her own estate will still only amount to £300,000 (assuming it has not risen in value) that she had when Mr Astley was still alive. Remember, Mr Astley's £300,000 went to the discretionary trust and not to his wife.

This means there was no inheritance tax to pay when Mr Astley died and none to pay when Mrs Astley dies. The IHT saved amounts to 40% of the £300,000 that Mr Astley put into the discretionary trust - which is £120,000.

All quite legitimate and above board and no money going unnecessarily into the exchequer coffers. If you don't enjoy paying tax unnecessarily don't start doing it after you die.

The above example hopefully gives a solid idea of how nil-rate band discretionary trust wills work. Broadly speaking, if you are married and your house is worth more than £300,000, then you would probably be able to save or avoid inheritance tax by using nil-rate band discretionary trusts in your will.

This kind of will is especially complicated if you are trying to do it yourself, so for expert no-obligation advice, please complete our enquiry form and we will pass your details to a professional will writer who specialises in trusts and inheritance tax planning.

Having paid tax all your life and paid tax on just about everything you have bought or acquired over your lifetime, don't let the taxman get the last laugh by dipping into your estate after your death.