Alarming reporting on the new Residential Nil Rate Band Allowance!

In April 4, 2017
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We have recently had a lot of questions from Clients and seminar attendees in relation to an article written in the Telegraph on 25th February. The article discusses how hundreds of thousands of people who established Trusts as a way of limiting Inheritance Tax liabilities, will have to hurriedly re-arrange their affairs – or risk losing out on a valuable new tax perk. In case you missed the article it can be found here! 

We wanted to take this opportunity to actually explain the truth regarding these new rules and put our Client’s minds at ease. Often when new legislation and tax rules are announced, there are a few grey areas which can be exaggerated or simply misinterpreted. It would appear that this article falls into one of these categories.

The Telegraph article is partially accurate in confirming that properties directed into Trust, if retained in the Trust, will be exempt from claiming the new Residential Nil Rate Band Allowance. After that however, the article gets legally inaccurate in some aspects.

The main point overlooked by the Telegraph is that properly constructed Discretionary Trusts (as our clients have) have built in powers so that as part of the probate process the Trustees simply appoint out only the value required in order to claim any residential tax free allowance available at the time of death.

This approach offers clients the flexibility to claim any current or future tax allowances, but still have the majority of their estate protected for their beneficiaries from divorce, care fees, bankruptcy and generational Inheritance Tax. This for many people is an essential reason for wanting Trust Planning, especially in light of the fact that no-one knows what the Inheritance Tax regime will be in the future and the controversial nature of this new residential allowance means it is unlikely to be a permanent feature in legislation.

In my opinion it is not only careless, but dangerous to mis-report the facts in this way and scare people into changing their Trust Planning, without seeking professional advice first.

Sadly as with many newspaper articles, the Telegraph reports into this new tax allowance lacks the required context and depth of understanding regarding the new rules.

Unfortunately, I expect to see a lot more articles in the press about these rule changes in the next month or more, which is why I no longer read newspapers.

For more information on Trust Planning and the Inheritance Tax changes please do not hesitate to contact the Redwood Team or why not come along to one of our upcoming seminars to learn more!

Jasmine has been a qualified Financial Planner since 2008. She has also been a member of the Society of Will Writers since 2012. She is passionate about helping Clients build their wealth and achieve the financial lifestyle they desire. Her areas of expertise are that of Savings, Investments, Pensions and Retirement Planning.

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