Making a Will is one of the most important things that you can do. It not only ensures to the best of your ability that your wishes with regard to the distribution of your estate are carried out properly, but also enables you to make the best provision for your family and friends.

Although successive governments have laid down provisions for what will happen to your estate in the event of you dying without a Will, these provisions inevitably are unlikely to be exactly the same as your wishes.

By making a Will you may:
• appoint the Executors who administer your estate
• choose the people who will inherit your estate
• decide the age at which younger beneficiaries will inherit
• appoint the Guardians who will bring up your children
• consider tax mitigation; and
• include wider administrative powers to assist your Executors

Despite popular belief, if you die without a Will it is unlikely that your estate would pass to the state, however it is quite possible that only part of your estate will pass to your husband or wife.

Do you know the effect of the legislation on your estate if you were to die? If you do not, and you would like further advice please complete and return to us the Will Questionnaire. Or telephone us and ask to speak to Nick Pinks or Judith Humphreys. The cost of making a Will may be less than you imagine, and you will have the satisfaction of making the best provision possible for your family.

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Inheritance Tax Summary

The Nil-Rate Sum is £275,000 for the tax year 2005/06. This is generally increased each year in the Budget and detailed below are the rates for the years since 2000.

The Nil-Rate Sum available for use in your Will will be limited if you have made chargeable gifts within seven years of your death.

For instance, if you have given £50,000 to your children a year before you die, the available Nil Rate Sum available for use in your Will will be £225,000 in 2005/06. Gifts made during your lifetime will be chargeable unless they are or become exempt. Detailed below are the exemptions which apply to lifetime gifts.

If you are entitled to receive income from a trust, you are classed as a beneficiary of a life interest trust. The Nil-Rate Sum would be shared between your estate and the trust as the capital of the trust would be valued as part of your estate for Inheritance Tax purposes even though you are not entitled to receive any of the capital funds. The Inheritance Tax is then apportioned between the trust and your estate and that attributable to the trust is payable out of the trust funds. The impact however is that any nil rate band available is utilised by the trust.

The main exemptions applying to lifetime gifts only are:-

1. You may give the annual exemption of £3,000 in total in any tax year; this may be backdated for one year if you have not previously utilised your exemption for the prior tax year. Accordingly the sum of £6,000 could be given if you had not made a gift in 2004/05 and 2005/06.
   
   
2. You may give small gifts of £250 per beneficiary per tax year;
   
   
3. In addition to small gifts, you may make gifts in consideration of marriage of £5,000, £2,500 or £1,000 (depending on the your relationship to the donee); and
   
   
4. You may provide for gifts which are normal expenditure out of income - a valuable exemption, which has some important conditions

The main exemptions applying to both lifetime gifts and gifts on death are:-

1. gifts to your husband/wife ("the spouse exemption") if you are both domiciled in England and Wales and
   
   
2. gifts to charity.

There is no maximum to these two exemptions. Spouse exemption still applies but to a very limited extent (currently £55,000) if the spouse to whom the assets are given is domiciled abroad.

This summary is based on the current law relating to Inheritance Tax, but changes to the tax may be announced at any time. The Nil-Rate Sum may at some stage be reduced but you should also consider the possibility of an increase in the Nil-Rate Sum by more than the inflation rate at some stage in the future. If there were a substantial increase, if your spouse was not included as a beneficiary of the Discretionary Trust, there would be a danger that you might leave your spouse insecure without sufficient financial provision.

Our advice, when relating to tax or where it has a tax consequence, will be based upon the law as generally understood and takes into account accepted Inland Revenue practice, interpretation, press releases and practice statements. These can be changed by the Inland Revenue without prior warning. Furthermore, where arrangements lead to a reduction in tax, such arrangements may be challenged by the Inland Revenue and for this purpose it has increasing powers to counter tax avoidance and the will to do so. There is an element of risk here which you must accept.

It is very important to keep your Will, and the value of your respective assets, under review both at regular intervals of at least every 5 years and with any significant change of circumstances.

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