People who added a discretionary nil rate band trust to their wills are being warned they could miss out on the new family home allowance.
From 6th April this year, the inheritance tax nil rate band is being gradually supplemented with a main residence nil rate band, allowing a couple to pass on an estate worth £1m free of inheritance tax by 2020/21.
However, only residential property which is left to a 'direct descendant' can qualify for this new family home allowance.
Direct descendants include children, stepchildren, adopted and foster children, and grandchildren. It does not include trusts.
So if your will makes provision for a discretionary trust to be created on the death of a first spouse or civil partner, leaving the value of your estate equivalent to a nil rate band to the trust, you will want to seek specialist legal advice.
This article in The Telegraph estimates hundreds of thousands of people could fall into this new tax trap, but it's impossible to know how many people have historically added a discretionary nil-rate band trust to their wills.
The good news is that you should have a two year period following the death of the first partner to make a deed of variation, which can work as long as all parties to the trust agree on the change.
This is definitely one instance where you should seek expert legal advice, preferably from a solicitor who is a member of the Society of Trust and Estate Practitioners (STEP).
However, around 16 million adults hold a will and in the past – particularly before 2007, when IHT rules changed – people establishing wills with the help of a solicitor or adviser are likely to have included a trust.