LEGAL EAGLES Malcolm Bowden, senior partner at Dixon Keogh, explains how the new rules on wills could affect your financial planning ..

Where there is a will ...

A WAG once said: The only things that are certain in life are death and taxes.' If so, death duties are the ultimate certainty - tax payable when you die.

Put it another way, of course, and you can say it is the only tax you will never pay - although your family will.

It is also said that Inheritance Tax (the current incarnation of death duties) is a voluntary tax - you (or your family that is) will only pay that if you are careless, or thoughtless enough not to sort out your affairs, employ an accountant and float a company or two in the Virgin Islands.

That said, not everyone has an accountant and not everyone knows where the Virgin Islands are.

So, assuming you are a volunteer, how do you at least reduce your voluntary contribution to Her Majesty's Revenue and Customs when you die?

One recently popular way is known as the discretionary trust will'.

Everyone has a sort of personal allowance, an amount they can leave tax free.

It is currently £300,000 and will be going up to £350,000 by 2010.

Up to that amount you pay nothing; after that everything is taxed at 40 per cent unless there is a special exemption.

The most noticeable exemption is for a surviving spouse. So if you leave everything to your wife or civil partner, they pay no tax.

But until October last year, when the rules were changed, if you did that the £300,000 personal allowance was wasted.

So for married people (or civil partners) it made sense to leave £300,000 (or whatever the personal allowance was) to, say, the children.

Then on spouse or partner's death they could leave a further £300,000 to children, or whoever, tax free. But, because there often was not £300,000 swishing around to give to the children or, if there was, spouse would need it to keep them in something approaching the style to which they had become accustomed, this was not always practical.

The big asset was probably the house, owned jointly, and worth a lot of money, particularly if the mortgage was paid off.

However, spouse (or partner) had got used to living there and would rather like to stay; they certainly did not want to downsize at such a traumatic time just so that they could give the kids a totally undeserved windfall to go and blow on riotous living, fast cars, higher education or some other pointless activity.

So the lawyers (and accountants - they 're just as bad, if not worse), scratched their heads and did a bit of creative thinking.

They came up with the discretionary trust fund will.

It is far too long and creative to explain in detail, but what it did was to put half of the value of the house - up to the personal allowance - into a trust which enabled spouse to stay but children to have the benefit of the personal allowance, at least on paper.

Then when spouse (or partner) died, the house could be sold and the kids, or other undeserving beneficiaries, could go on their spending spree and have the benefit of both Mum and Dad's personal allowances. That's the history. Now, since an announcement made by Alistair Darling in October 2007 and to be enshrined in the Finance Act 2008 following this year's Budget, all this creativity is, for most people, not going to be needed. How so? Because everyone was being creative, making the magic wills and the Revenue was not getting the tax anyway, they decided to be generous and allow unused personal allowances to be carried forward.

So now, if you leave everything to your spouse or civil partner, there is no tax as before, but (and this is the change) the personal allowance not used can be carried forward and claimed when they die by doubling the exempt amount on their estate.

This means that, at the moment, they can leave up to £600,000 without any tax and this will go up to £700,000 by 2010.

Because of this you may well want to re-visit your will, because the new rules are likely to be even more tax effective than the smoke and mirrors versions using discretionary trusts have been.

So, come and see us. Let us talk you through it, have a look at your present will and advise you how best to go about taking advantage of the Chancellor's astonishing generosity at the same time as providing for your spouse, your partner, children, even the family pets (and that is another story).

I should add, by the way, that the new rules are not likely to be a charter for serial widows, widowers or civil partners, racking up an additional personal allowance every time.

It seems likely that you will only get one bite at the cherry, although you never know what creative lawyers and accountants may come up with