Q. My wife and I live in a house which is worth £1.5million, so we were pleased when the Chancellor announced that an extra amount of our estate would be free from inheritance tax on our deaths. Now one of my neighbours tells me we may not qualify for this exemption. Can you explain?
A. On death, the first £325,000 of your estate, less any gifts made in the last seven years, is free from inheritance tax (the nil rate band), with the remainder of the estate taxed at 40%. No tax is payable on transfers to a surviving spouse and if none of the nil rate band is used on the first death, it can be passed on and used by the survivor. In the March 2015 Budget, the “Residential Nil Rate Band” was proposed, to be introduced gradually from April 2017. Eventually, this will give an extra £175,000 where the deceased has a “qualifying residential interest” (effectively a main residence) worth more than £175,000. This gives a total of £500,000 per person, or up to £1m for a married couple and those in a civil partnership. However, no new tax break seems able to be introduced without complex small print and the new extra allowance is reduced for estates over £2m, by £1 for every £2 by which this threshold is exceeded. So if your total estate exceeds £2,350,000 (for an individual), or £2,700,000 (for a married couple or those in a civil partnership) then the new allowance does not apply. It is unusual for those living in a house worth £1.5m not to have some other money in the bank or invested, so this is probably what your neighbour was referring to. Please note this is a complex area, which I have only briefly touched upon above, and one where individual advice can often save significant sums in tax to your beneficiaries, and I recommend you take advice from a Chartered Financial Planner, and / or a specialist solicitor in this respect (look for a member of STEP, the Society of Trust and Estate Practitioners)
Q. I have recently been asked to be the executor for my brother’s will. I am a little worried about accepting, as I don’t have any idea of what is involved and fear that I might be taking on a responsibility I cannot fulfil. At the same time I don’t want to offend my brother. Can you help?
A. The executor of a will is tasked with reconciling a deceased’s financial affairs, ensuring that all debts and taxes are paid before distributing the remaining assets in accordance with the deceased’s will. This includes ensuring that any inheritance tax liability is paid and obtaining probate.
If you agree to be the executor of your brother’s will, you can either exercise this function yourself, instruct a solicitor to do it on your behalf or instruct a solicitor to assist you, thereby getting help when you need it. If you have any reservations as to whether you ought to agree to your brother’s request, I suggest that you speak to a solicitor who specialises in wills and probate who ought to be able to offer you further guidance.
If you have a question you would like Trevor to answer, please email it to: yourmoney@rwpfg.co.uk or post it to Your Money, Rutherford Wilkinson Ltd, Northumbria House, 21-23 Brenkley Way, Blezard Business Park, Newcastle upon Tyne, NE13 6DS.
