It is quite normal for Mirror Wills to include a survivorship clause, however in relation to married couples it may be preferable to take out the survivorship clause for each other, otherwise it may result in an unexpected Inheritance Tax bill, so why is that?
Married couples have the benefit of the ?transferable nil rate band? for Inheritance Tax purposes provided the first one to die leaves part/ all of his estate to his surviving spouse. When she, the survivor dies she will not only have her own nil rate band available, she will also have the percentage part, or all his nil rate band as well. Here?s an example for you to follow:
So when Mr died/left everything to Mrs, she will then have two complete nil rate band?s to use against their total estate when she dies, the maximum allowance she has therefore is currently ?650,000 before Inheritance Tax would apply.
Now imagine that Mr & Mrs die within a few days of each other following a car accident, Mr died first, their survivorship clause would mean that Mrs would not get his estate at all, it would go to the children in equal shares, and as his estate was value at ?400,000 (i.e. ?75,000 above the nil rate band of ?325,000) there would be 40% Inheritance Tax to pay on the ?75,000 excess, which is ?30,000. So the ?400,000 less ?30,000 tax bill would go to their children in equal shares.
The survivorship clause is there to avoid a double probate cost/time hit in the event that a couple die together which is sensible, however what we would recommend is excluding each other from the survivorship clause. Not everyone is going to save ?30,000 as in the example, but it is worth your while getting in touch with us if you want to be certain of the outcome.
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