We could be forgiven for thinking that the Chancellor in his pre-budget speech has rendered wills and estate planning for married couples unnecessary; and that it is safe to sit back believing that the Chancellor has made planning unnecessary by increasing the threshold for married couples.

It is fair to say that for those married couples who had not taken appropriate advice previously on how to save Inheritance Tax by using both nil rate bands, this recent news will be of some assistance - but, it is by no means the whole truth.

Transfers between spouses are exempt for Inheritance Tax and therefore no Inheritance Tax is payable on the death of the first spouse. Yet on the death of the surviving spouse, Inheritance tax is payable on their estate if it exceeds £650,000. Inheritance tax is charged at 40% on the balance over this threshold.

A straightforward Will giving everything to your spouse does not pay any Inheritance Tax. You could have gifted up to £325,000 (e.g. to children) without being subject to Inheritance Tax and given the rest to your spouse, but this could leave your spouse in a difficult financial position.

Nil Rate Band discretionary Trusts are no longer necessary for joint estates of less than £650,000 (2010 - 2011) but they are of great benefit in other circumstances.

Nil Rate Band planning is not now normally considered for mitigation of Inheritance Tax but it is still used regularly to protect against some or all of the following situations.

SOME OF THE BENEFITS OF DISCRETIONARY TRUSTS:

? Access to funds by surviving spouse.

? Interest free loans can be made to surviving spouse repayable on his or her death reducing their IHT liability even more.

? Ensure that the assets held in trust are not assessed as capital of the surviving spouse should he or she require long term care.

? Protects against assets passing to the spouse's new partner in the event of remarriage.

? Protection to some extent against bankruptcy

IT IS ALSO NECESSARY TO CONSIDER THE FOLLOWING:

Joint assets pass direct to the surviving spouse and do not pass under the Will. These joint assets cannot be used to fund the Discretionary Trust Fund. It may be necessary to equalise your respective estates to ensure both spouses have sufficient sole assets to utilise the Nil Rate Band Discretionary Trust to best effect.

The largest asset owned in most instances is the family home. Often this is held by both parties as joint tenants. In order to make certain that each spouse has sufficient sole assets to satisfy the Nil Rate Band Trust it may be necessary to split the joint tenancy of the property. Each spouse would then own the property jointly as tenants in common. Although the property would still be owned jointly with your spouse, the significant difference is that on the death of the first spouse the 50% share owned by them can then be used towards funding the Nil Rate Band Discretionary Trusts.

By specialist wording within the trust the surviving spouse can continue to own the whole property but the value of deceased's share in the property will be outwith the surviving spouse's estate. Although Stamp Duty Land Tax may be payable at the time of the deceased's death it will only be a fraction of the potential Inheritance Tax (IHT) liability. The assets within such a trust arrangement will not be regarded as the spouses capital should he or she require Long Term Care.