Will Planning and IHT

Key facts

A well-drafted will can ensure both the NRB (£325,000) and RNRB (£175,000) are fully utilised.
NRB legacy trusts can use the first spouse’s nil-rate band immediately, rather than relying on the transferable NRB.
Leaving the family home to direct descendants is essential to claim the residence nil-rate band.
Including a charitable legacy of at least 10% of the net estate qualifies for the 36% reduced rate.
Dying intestate (without a will) can result in a larger IHT bill because the estate may not be distributed tax-efficiently.

Why Will Planning Matters for IHT

Your will is the primary document that determines how your estate is distributed on death. The way assets are directed in the will directly affects which IHT exemptions and reliefs apply. A carefully drafted will can save tens or even hundreds of thousands of pounds in IHT.^[1]

Key decisions in will planning include: who should inherit, whether to use trusts, how to structure charitable gifts, and how to ensure the residence nil-rate band is claimed.

Maximising Available Reliefs

Claiming the RNRB

The residence nil-rate band (£175,000 per person) is only available if a qualifying residential property passes to direct descendants (children, grandchildren, step-children, adopted children). Your will must be structured to ensure this happens:^[3]

Leave the family home (or a share of it) to your children or grandchildren
If the home is left to a trust, it must be an immediate post-death interest (IPDI) or bare trust for direct descendants
A discretionary trust including direct descendants will qualify if the trustees appoint the property to them within 2 years of death

The Transferable NRB

If the first spouse leaves everything to the surviving spouse, their NRB is 100% unused and can be transferred to the surviving spouse’s estate, giving a combined £650,000 threshold. This is automatic on claim — but the PRs must submit form IHT402.^[1]

NRB Legacy Trusts

Before the transferable NRB was introduced in 2007, NRB legacy trusts were the standard way for married couples to use both NRBs. The first spouse’s will would leave assets up to the NRB into a discretionary trust, with the surviving spouse and family as potential beneficiaries:

The first spouse’s NRB is used immediately
The trust assets are outside the surviving spouse’s estate
The surviving spouse can still benefit from the trust if needed
The trust protects assets from remarriage risk and care home fee assessments

TNRB vs NRB trust: The transferable NRB is simpler and does not require a trust. However, an NRB trust offers additional benefits: asset protection, flexibility for trustees, and removal of growth from the surviving spouse’s estate. The right choice depends on the size of the estate and the family’s priorities.

Charitable Legacies

Including a charitable legacy in your will can reduce the IHT rate from 40% to 36% if at least 10% of the “baseline amount” goes to charity. Will drafting tips:

Specify the charitable gift as a percentage of the baseline amount (not a fixed sum) to ensure the 10% threshold is always met
Include a long-stop clause that adjusts the gift if estate values change
Name specific charities by their registered charity number to avoid ambiguity

Common Will Planning Mistakes

Mistake	Consequence	Solution
Not making a will	Intestacy rules may waste exemptions	Make a will and review it regularly
Leaving everything to spouse outright	RNRB may be lost if home doesn’t pass to descendants	Consider a flexible trust or direct legacy to children
Not updating after marriage/divorce	Marriage revokes a will; divorce does not	Review will after any life event
Ignoring the RNRB taper	Estates over £2m lose the RNRB	Plan to bring the estate below £2m if possible
Fixed charitable legacy too small	Misses the 10% threshold for 36% rate	Use a percentage-based charitable clause

Deeds of variation: After death, beneficiaries can redirect their inheritance using a deed of variation (within 2 years of death). This is treated as if the deceased had made the new arrangement in their will, and can be used to improve the IHT position — for example, redirecting assets to charity or to the next generation.

Frequently Asked Questions

How does a will affect IHT?

Your will determines who receives your assets and how they are distributed. This directly affects which exemptions and reliefs apply. For example, assets left to a spouse are exempt, assets left to direct descendants can claim the RNRB, and charitable legacies can qualify for the 36% rate. Without a will, the intestacy rules may not produce a tax-efficient result.

What is an NRB legacy trust?

An NRB legacy trust (also called a nil-rate band discretionary trust) is a clause in the first spouse’s will that directs assets up to the NRB into a discretionary trust rather than leaving everything to the surviving spouse. This uses the first spouse’s NRB immediately and keeps the assets outside the surviving spouse’s estate.

Is an NRB legacy trust still useful with the transferable NRB?

The introduction of the transferable NRB (TNRB) in 2007 reduced the need for NRB legacy trusts in many cases. However, they can still be useful for protecting assets from remarriage, care home fees, or estate growth. Professional advice is needed to determine which approach suits your circumstances.

What happens if I die without a will?

If you die intestate, the intestacy rules determine who inherits. The rules may not utilise all available exemptions efficiently — for example, a cohabiting partner receives nothing under intestacy, and the RNRB may be lost if the home does not pass to direct descendants in the right way.

Sources

How Inheritance Tax works: thresholds, rules and allowances — GOV.UK
Making a will — GOV.UK
Inheritance Tax: residence nil rate band — GOV.UK