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Discretionary Wills Trusts

Under recent changes to the law, when an individual dies, if they leave their estate to their surviving spouse there is no Inheritance Tax to pay due to the spouse exemption. 

On the death of the second individual, the Executor can claim any unused proportion of the nil rate band.    For example, this means that if an individual left 100% of their estate to their spouse then on the second death the nil rate band can be increased by 100%.  free consultationPrior to these changes in the law, many people signed what were known as Discretionary Trust Wills. These Wills contained a provision so that on the first death, rather than leaving everything to their surviving spouse, an individual left an amount up to the nil rate band to a discretionary trust.  Therefore their nil rate band was not lost.   Due to the changes in the law it is no longer necessary to use this mechanism to maximise the amount of money that can pass without Inheritance Tax being payable.  

However, it is important that on the first death consideration is given to bringing the discretionary trust to an end.    This must be done within two years of the first death.    Failure to comply with the legal requirements may mean that on the second death the executors have difficulties and additional expense administering the estate.   In order to discuss whether your current Wills need to be amended or to deal with the estate of an individual whose Will contains a Discretionary Will Trust, please contact one of our Solicitors who all have expertise in this area of the law.