Financial And Tax Traps In Your Will That Most People Miss

A Will isn’t only about who gets what. It’s also about how tax is managed, how gifts are paid, and what happens if circumstances change. Many people unknowingly include provisions that create unexpected tax bills or complications for their executors.

In the third and final part of our series on key factors people don’t consider when making a Will, Talita Fantauzzi, Solicitor in our Wills and Probate team at our Nottingham office highlights the key financial and tax issues to keep in mind when making or updating your Will.

How Inheritance Tax (IHT) is paid

Before your executors can apply for a grant of probate, they must settle any inheritance tax due. This means:

• Your executors must calculate the tax owed
• They submit forms to HMRC
• They pay the tax before they can administer your estate

If you appoint professional executors, the solicitors will prepare these forms for your executors to sign.

It’s important to choose executors who can manage these responsibilities or seek help to minimise stress.

The “Residence Nil Rate Band”

If you leave your home to a direct descendant (children, grandchildren, etc.), your estate may benefit from the Residence Nil Rate Band (RNRB) and the Transferable Residence Nil Rate Band (TRNRB).

This can add up to £350,000 of additional tax-free allowance on the second death. But it only applies if the property goes to a direct descendant.

If your surviving spouse leaves the property to:

• A sibling
• A friend
• A charity
• A partner’s child (who hasn’t been legally adopted)

the allowance may be lost.

Property Trusts — when they help (and when they don’t)

Couples who own their home as tenants in common sometimes create a property trust, giving the survivor a right to live in the property for a set period.

This can protect children from a new partner inheriting.

However, if the right only lasts a short time (e.g., one year), it may create more tax liability than benefit.

It’s worth taking advice to ensure the trust period genuinely works in your favour.

Leaving 10% to charity can reduce your tax rate

Gifts to UK-registered charities are exempt from IHT. But they can also trigger a tax reduction:

If you leave 10% of your net estate to charity, the tax rate on the rest of your estate drops from 40% to 36%.

This can sometimes result in:

• More money to charity
• More going to your family
• Less going to HMRC

It’s a powerful planning tool, but the calculation must be done correctly.

When gifts fail – specific items

If you leave a specific asset (“my Rolex”, “my car”, “my home”) and it no longer exists when you die, the gift fails.

You can prevent disappointment by adding a substitute gift (e.g., “If I no longer own this item, my trustees shall instead give the beneficiary a sum of £X.”)

When cash legacies can be reduced (“abatement”)

If you leave several cash gifts — £10,000 here, £5,000 there — but your estate doesn’t have enough to pay them all, the law usually requires all cash gifts to be reduced proportionately.

Cash gifts take priority over residue. This means your residuary beneficiaries get whatever is left after all cash gifts are settled.

It’s important to check the balance between:

• The number of cash gifts, and
• The size of your estate

to avoid unintentional outcomes.

Who pays the costs of delivering personal items?

By default, the beneficiary pays for collection or shipping.

If you want your estate to cover these costs, you need to say so explicitly and even then, defining what’s “reasonable” helps prevent disputes.

The financial details of a Will can dramatically shape how your estate is handled. Taking the time to structure gifts carefully and understand tax implications can save your loved ones stress, cost, and confusion later.