Tel: 01672 512 244 | law@merriman-partnership.co.uk
Inheritance Tax
Inheritance Tax Planning
Until October 2007, it was possible for married couples and civil partners to shelter the Inheritance Tax (IHT) Nil Rate Band (NRB) available to the Estate of the first to die from IHT which would fall due on the survivor’s death. This was typically done by creating a discretionary trust of the NRB by Will, which then took effect after the first death.
However, in October 2007, the Chancellor announced that the NRB for married couples and civil partners would be transferable in so far as the assets of the first to die passed to the survivor.
This means that if one of a couple dies, and leaves all the Estate to the survivor, the survivor’s Estate can then claim 2 full NRB’s at the rate applicable on the survivor’s death.
The first death can have been at any time, but the second death must have been after October 2007. There is no longer any IHT advantage in setting up an NRB discretionary trust in your Will, as it may reduce the NRB available on the second death, although there are other advantages to be gained, for example sheltering assets from residential care fees, or vulnerable beneficiaries, or step families. However, please note, that the assets you put into your NRB discretionary trust could theoretically increase in value faster than the NRB itself increases, for example, building land, so there may be a use for the NRB will trust in such cases.
The NRB is currently £325,000.
What to do next
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