The law of unintended consequences

 In Comment

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Look diligently as you can but you will not find a statutory reference to one of the most important laws that affect us – the law of unintended consequences.  How often have statutory good intentions been thwarted by consequences not thought about at the time the new law was enacted.

There is no better current example of this than the problems arising from the creation of the transferable nil rate band for IHT purposes. These problems are not to do with the legislation itself, complex as this is and interesting as are some of the issues that it throws up, but rather they are occurring as a result of the very concept of this legislation.

Whilst I suspect that the legislation was introduced as an immediate political reaction and counterbalance to the proposals put forward by the Conservative Party who indicated their intention to raise the IHT threshold to £1m, that is not the current issue.

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What is now happening, or so I am told, is that, because there is no need for a nil rate band discretionary will trust in order to take advantage of the double exemption on the death of the surviving spouse or civil partner, people are confusing this with the necessity to make a Will at all.

The consequence of a statutory double nil rate band, in the appropriate circumstances of course, is leading the great British public, no doubt aided and abetted by the financial press, to take the view that, as you no longer need a complicated trust as an essential part of your Will, so the unintended and definitely undesirable consequence that is drawn by the public is that you do not need a Will at all.

This is both absurd but also dangerous. The legal complexities of an intestacy coupled with the family traumas that it can and, in my experience, does produce when the residuary beneficiaries of it are minor children do not need much explaining to professionals engaged in our field but it requires a very good deal of explanation to lay clients and perhaps the press as well.

We need to get out into the public and campaign as vociferously as we can that the changes to the Inheritance Tax system do not in any way mean that the concept of a Will has become redundant or obsolete. Quite the reverse.

Whatever the banners say and whether we march physically or virtually (I assume that as you seem to be able to do everything else “virtually” you can march “virtually”) we need to get the message out to clients, current and potential, that transferable nil rate bands may be a great wheeze for escaping IHT but they are no substitute for a well drawn Will.

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