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Review your will or you could pay a price

Review your will or your family could pay £20,000 too much in Inheritance tax following Alistair Darling's Pre Budget Report, warns a tax expert at Accountants & business advisers PKF East Anglia.

Peter Harrup, a partner at the firm that has offices in Norwich, Ipswich and Great Yarmouth says before it was only those people who sought tax advice who could save their beneficiaries large sums of money in inheritance tax (IHT).

But following the report, it is precisely those people who need to reassess their wills or see the cash they worked hard for disappear back into the government's coffers.

Mr Harrup warns: "The changes to IHT have made many established tax-planning techniques redundant. It could mean couples who already have IHT-saving plans in place, and who use the nil-rate allowance at the time of the first death, leave their beneficiaries paying £20,000 more in tax.

"The rules are complex and the terms of everyone's will are different. The important thing is to recognise that the tax regime has changed significantly and for the better, but that people may need to act now to ensure their families derive the maximum benefit when they die."

Mr Harrup explained: "The £300,000 Inheritance Tax threshold has effectively doubled to £600,000 for most married couples and civil partners, with incremental increases due to rise to £700,000 by 2010.

"But only if the nil rate band is not used at all on first death, otherwise the £50,000 increase scheduled for 2010/11 could be lost and tax at 40 per cent of £20,000 paid needlessly."

Widows or widowers may also now be able to leave more assets to their families tax-free even if their spouse died many years ago and they have remarried.

"Given the massive rise in the housing market in recent years, that means hundreds of thousands of people will be affected and they should review the existing terms of their wills with a tax specialist.

"Older couples may also wish to defer making lifetime gifts to the next generation until after the first death to reduce the risk of freezing part of their combined nil-rate bands if the donor dies within seven years of the gift.

"My best advice is to have the tax plans you have put in place upon your death looked at by an expert and be safe, or your beneficiaries may end up being sorry if you fail to plan in light of the changes," he added.

Article by BDO LLP

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