Estate Planning for couples with an Estate value greater than £650k (2 x Nil Rate Band)

Updated: Feb 11

Most family homes are held as joint tenants meaning each person owns the property jointly. So a typical basic mirror Will leaves everything to surviving spouse/partner on first death. However, there are risks to both the survivor’s inheritance and that of the beneficiaries.

On 1st death RISKS to the surviving partner's inheritance:

Care fees

The surviving partner may need care in the future. If so, the entire inherited estate

– including the family home – would be assessed by the local authority to pay for that care.

Remarriage

On first death, the estate is solely owned by the surviving partner. If they remarry, the estate is taken into the new marriage and children could be disinherited.

Inheritance tax (IHT)

If the amount inherited is greater than the nil rate band, (currently £325k for a single person & £650k for a couple) the excess is subject to inheritance tax. Since the inheritance adds to the survivor’s estate, inheritance tax could be paid again on their death – a double whammy!

Creditors or bankruptcy

If the surviving partner went bankrupt or was the subject of claims by creditors, the entire inherited estate would be at risk.


On 2nd death RISKS to your children's and other beneficiaries' inheritance:

Divorce

If children or other beneficiaries get divorced, half of what you intended them to receive could end up in the hands of their ex.

Care fees

If children and other beneficiaries need care in the future, their assets – including their inheritance from you – could be assessed to pay for the cost of that care.

Creditors or bankruptcy

A beneficiary’s entire inherited estate is at risk if they go bankrupt or are subject to claims from creditors.

Generational inheritance tax (IHT)

A Will typically divides up an estate between beneficiaries. This adds to the beneficiaries’ own estates, which could then be subject to inheritance tax on their deaths.

The ownership of your home is changed at HM Land Registry from ‘joint tenants’ to ‘tenants in common’, each partner now owns half of the home. The owner’s share of the property is conveyed into their Asset Protection Trust Plus (APT+) while the owners are alive, giving instant protection. The surviving spouse/partner can continue to live in the home or move if they so wish, and use other assets.

The ENTIRE property is ‘ring-fenced’ from predation. The surviving partner can continue to use the assets owned by the trusts. Qualifies for residence nil rate band if there are lineal descendants (children, grandchildren etc). Assets held in the discretionary trust don’t add on to a beneficiary’s estate.


Now protected from:

Care fees

Assets held in the trusts are not part of the beneficiary’s estates. This means these assets cannot be assessed to pay for care fees.

Remarriage

If the surviving partner remarries, the assets held in the deceased’s trusts cannot be taken into the new marriage. It means that children from the original relationship cannot be disinherited completely.

Divorce

If any of the beneficiaries get divorced, none of the inheritance intended for them would be lost to their ex.

Creditors or bankruptcy

If a beneficiary goes bankrupt or is subject to claims by creditors, inheritance held in the trusts would not be subject to these claims.

Generational inheritance tax (IHT)

The inheritance held in the trusts doesn’t add on to beneficiaries’ own estates so it won’t affect their own inheritance tax liability.




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