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For example, all Wills drafted prior to 6 April 2017 must be refreshed and updated and all clients warned of this. The RNRB does not apply to estates over £2million but there are complex tapering provision to consider.
Perhaps, and more importantly, the Executor is placed in a more complex position following the introduction of the RNRB. The additional RNRB will also be available for individuals who downsize or sell their home and pass assets of an equivalent value onto direct descendants on death. Evidence of the sale of the property will be required. This places pressure on the Estate Administrator who must provide the evidence and who may need to obtain professional advice thereon. The new allowance only applies to transfers of property on death – so gifts of property before death to direct descendants will not qualify for the RNRB unless they qualify for downsizing. It remains possible for beneficiaries to enter into a Deed of Variation after death to ensure the qualifying residential interest passes to direct descendants. The Executor is responsible for assessing the suitability of the Deed of Variation and the correct drafting and application thereof.
The Pressure for the Adviser
If a couple’s combined assets exceed £2million then they should seek advice to see if their Wills can be updated to avoid any “bunching” effect on the second death. For example they could revise their Wills so that part of the estate of the first to die is inherited by their children or passes to a Nil Rate Band discretionary trust. Such alternatives and dilemmas place pressure on those charged with the responsibility of drafting the Will and providing proactive clear advice. The value of the estate for the purposes of the availability of the relief (ie below the £2million threshold) does not include failed potentially exempt transfers – therefore it could be beneficial for wealthy couples and individuals to make lifetime gifts of other assets to help maximise the availability of the RNRB on death.
The PI protection for those drafting Wills and those dealing with IHT planning is therefore key to ensure a balance between proactive added value and the risk of doing nothing. The RNRB has reinforced the fact that professional advisers charged with Will drafting have massive responsibilities to understand the testator’s full financial position, eg. how they hold joint property – as joint tenants, tenants in common or partnership property. There must be both a forensic and holistic approach.
Reproduced by kind permission of LawSkills Ltd from their website (www.lawskills.co.uk). A site dedicated to helping Private Client Practitioners.
Disclaimer: LawSkills provides training for the legal industry and does not provide legal advice to members of the public. For help or guidance please seek the services of a qualified practitioner.