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New IHT rules herald changes to Wills

With the changes to pensions coming up very soon (Chancellor George Osborne announced the changes last year, but they are due to come into effect on April 6 of this year), we thought it best to start discussing the changes and what that means for some of us.

The changes coming into effect will give retirees more control over their pension pots, meaning individuals with a defined contribution (DC) will be allowed to draw on it as they choose fit. But the new rules don't only affect pensions – they also affect the tax-free status of ISAs, an article on the Telegraph notes.

In an 'Ask The Expert' piece published earlier this week, it is noted that it may be best to pass on an ISA to a spouse or partner directly, rather than to children. This is because passing an ISA (the article uses an amount of £50,000 as an example) on to a spouse means they will be able reinvest the amount as well as their own £15,000 ISA allowance. On the other hand, if an ISA is passed on to children then the full amount will need to be drip-fed to them as there is a £15,000 ISA limit. This therefore means that it could take a long time – years, even – for the full amount to be passed on; meanwhile, if the partner or spouse in question has no means of using their allowance that tax year, then it will be totally wasted.

Inheritance tax (IHT) is affecting a number of different investment options. It is believed that whilst IHT rules currently affects only 5% of families, within the next three years this could rise to 10%.

Do you understand the implications of IHT and tax-free ISAs? Will you be changing your will to take these changes into account?