Discretionary Trust Wills allow a married couple (or those in a civil partnership) to make use of the inheritance tax nil-rate band allowance of both spouses, rather than just that of the surviving spouse.

To explain how this works, we'll use an example of a couple called Mr and Mrs Smith and we'll assume that Mr Smith is the first to die. However, the rules would be the same regardless of which of them died first.

We will also assume, for simplicity, that the inheritance tax threshold is at the current level of £300,000 at the time of Mr Smith's death and Mrs Smith's death.

By the way, if you haven't already done so, you might find it useful to read this page about avoiding inheritance tax and the example of Mr and Mrs Jones before you go any further.

Let's imagine that Mr and Mrs Smith each have an estate of £300,000. They wish to give everything to the surviving spouse when the first one dies, and on the second death they want everything to go to their children.

Because Mr and Mrs Smith are going to use nil-rate band discretionary trusts, they are going to avoid the £80,000 inheritance tax bill that Mr and Mrs Jones's children had to deal with. This is despite the fact that the Smiths are worth £50,000 more than the Joneses.

When Mr Smith dies, instead of leaving £300,000 in his will to Mrs Smith, he instead leaves it to a discretionary trust.

With the agreement of the trustees, Mrs Smith is able to borrow money or draw an income from the trust during the remainder of her lifetime. As a result, she is not left short of money and the marital home does not have to be sold.

When Mrs Smith dies her own estate will still only amount the £300,000 that she had when Mr Smith was still alive. Remember, Mr Smith's £300,000 went to the discretionary trust and not to Mrs Smith.

This means there was no inheritance tax to pay when Mr Smith died and none to pay when Mrs Smith dies. The IHT saved amounts to 40% of the £300,000 that Mr Smith put into the discretionary trust - which is £120,000.

The above example hopefully gives a general idea of how nil-rate band discretionary trust wills work. Broadly speaking, if you are married and your house is worth more than £300,000, then you would probably be able to save or avoid inheritance tax by using nil-rate band discretionary trusts in your will.

This kind of will is especially complicated if you are trying to do it yourself, so for expert no-obligation advice, please complete our enquiry form and we will pass your details to a professional will writer who specialises in trusts and inheritance tax planning.