Probate- DIY SOS

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Is DIY Probate a good idea?

It’s common for Executors to take away a professionally drafted will with a view to obtaining probate themselves. This is known as DIY probate and done in an effort to save legal costs, sometimes without checking the terms of the will. For example a will may contain a will trust that, if ignored, could result in an unexpected inheritance tax bill.

Nil Rate Band

Until 2007, married couples who had combined assets in excess of the Nil Rate Band (NRB) of £325,000 (the personal allowance for Inheritance tax) were often advised to place their allowance into a will trust, ensuring their NRB was not lost. Simply leaving one’s entire estate to one’s spouse, on the first death of a married couple, may result in wasting your NRB. Although no Inheritance tax would have been payable on the first spouse’s death, on the surviving spouse’s death only one NRB would be available meaning Inheritance tax may become payable at 40%. A spouse may have been advised to place their NRB into a will trust to ensure it was fully utilised. Rising property prices concerned couples, who may not have thought themselves at risk of paying Inheritance Tax.

Since 2007 the NRB has been transferable between spouses.  A husband’s or wife’s Executor may be able to claim an unused NRB, as well as the surviving spouse’s on their death. The need to include a will trust for inheritance tax planning purposes has therefore reduced.

Many people have, however, not updated their Wills and will trusts are still common. The type of will trusts often included in tax planning Wills are of a discretionary nature, if they are not dealt with within two years of death, one could end up losing the NRB of the first spouse to die.

When an Executor seeks to obtaining probate themselves, a will trust often does not come to light until the second spouse dies or when the surviving spouse wants to update their Will years later. Time must be devoted to dealing with a trust which may not have been administered for many years resulting in unexpected taxes and costs, together with tough negotiations with HMRC. All of which may have been avoided had the right advice been sought.

For further information, please make an appointment with one of our Wills, Trusts and Probate team.

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