Making a will could save you money. So could the way you own your home. A lot of money. Up to £120,000 in the 2007/08 tax year.

When property passes between married couples or civil partners on first death, either by the terms of a will or survivorship if they own property as joint tenants, an Inheritance Tax Allowance of £300,0000 is effectively wasted. There is no tax to be paid on transfers between spouses, but tax is payable on most other transfers such as to your children on second death.

When the second member of a couple dies anything over the current nil rate band of £300,000 is taxed at 40%. By using some or all of the nil rate band on first death you ensure that the value of the estate on second death is reduced as much as possible thus saving tax, and helping to ensure that you pass on as much as possible to your beneficiaries.

One way of helping you do this is by owning your home as tenants in common. This means your house will pass under the terms of your will rather than automatically to the surviving spouse. This on its own, with an appropriately worded will may be enough to avoid Inheritance Tax. If it’s not, you can create a “Nil Rate Band “ trust.

Your will creates a trust of the maximum amount you can give away without that gift being liable for tax, with your spouse and children being beneficiaries of the trust.. The trustees can accept what is effectively an IOU for the full value of the trust assets which is not repayable until second death. They then have full use and control of all of the assets. When he or she dies they have their own nil rate band to use plus a debt to your estate which must be repaid before their estate is assessed for tax.

These measures are also potentially effective in reducing your liability for care home fees. A combination of a well thought out and professionally drafted will, and holding property as tenants in common can also be used to ensure you benefit children from an earlier relationship without causing hardship to your current partner.

You should also consider making Enduring Powers of Attorney. This will enable you to choose, whilst you are able, who will look after your affairs if you become physically or mentally incapacitated. The law on Powers of Attorney changes in October 2007 and you should act now if you want to avoid unnecessary complications and expense.

For more information please complete the following online form and a member of the Wills & Probate team will contact you.