Helpsheets > Capital taxes helpsheets >

Discretionary Trust Wills

Save up to £120,000 in IHT!

A transfer between married couples is exempt from IHT whether made during lifetime or in a will.

Where your combined estates are worth over £300,000, you can save by making a pair of Discretionary Trust Wills (also known as nil rate band discretionary trust wills). The wills are worded so that whatever the IHT threshold happens to be when the time comes, that amount is put into a discretionary trust.

The will appoints trustees to manage the trust for the benefit of your spouse and family. The trustees will have wide powers over the management of the assets and timing and how the assets are distributed. You leave them a letter of wishes to follow which includes putting in place an IHT planning scheme such as an IOU loan scheme involving the family home. The letter isn’t legally binding so the plan can be changed if circumstances dictate.

Your first £300,000 that passes to your wife is automatically free of IHT and the next £300,000 is covered by your IHT exemption and is held by the trust and not your spouse, so won’t form part of their estate on death. This saves £300,000 x40% = £120,000. Your spouse gets access to the funds by means of loans.

You may need to consider how the matrimonial home is owned. Most couples hold their house as joint tenants, meaning if one dies, their half automatically passes to the other and so is not part of your estate you can put into a discretionary trust. You need to get the property held as tenants in common, so that you each own your own half which can be passed to the trust.

How We Can Help You
We can advise you on the tax issues of setting up of discretionary trust wills and other inheritance tax planning arrangements.

Got a Question?
If you have any queries on any of the above, please ask a question