Married couples and civil partners enjoy an important advantage when it comes to inheritance tax. They can transfer between each other assets of unlimited value without triggering a charge to tax. However, this benefit overlaps a concession which everyone enjoys, that inheritance tax is charged at a nil rate on an initial band of value. This nil rate band changes each year but the rate for the tax year 2007/8 is £300,000.

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Couples concerned to ensure that their estates enjoy both of these advantages have for many years arranged their Wills to incorporate a trust into which assets up to the value of the nil rate band would be transferred on their death.

However, concern about the way in which rising house prices have pushed an increasing number of estates over the nil rate band has prompted the Government to change the rules so that any part of the nil rate band not utilised by the estate of one partner can be carried forward to enhance the nil rate band of the surviving partner.

So does this mean that nil rate band Will trusts are no longer necessary? The answer is that it’s not that simple (it never is!). Each situation must be considered individually. For example, it could be that one of the partners has previously been widowed and may therefore already have a double nil-rate band, which can be dropped into the Will Trust.

Another situation where the Will Trust could be valuable would be where there was a wish to avoid children inheriting assets outright. If assets passed instead to a trust this would protect them against claims by creditors or ex-spouses.

The length of time separating the first and second death could also affect the tax planning. Under the new law, both the nil rate bands will be based on the rate which applies at the time of the second death, whereas the value of the nil rate band transferred into trust would be that applicable at the time of the first death. So a view would have to be taken as to whether the investment growth of the assets in the trust would be likely to outstrip the yearly escalation in the nil rate band.

A surviving partner might also be better served by having part of the deceased partner’s estate directed to a Will trust if he or she was likely to be applying for meanstested Long Term Care benefits.

Finally, there could be an advantage in situations where the survivor re-marries, because even though more than 100% of the nil rate band might accrue from the previous and new marriage, the benefit which could be passed on would be capped at 100% of the then current nil rate band.