Wills & Probate
© InHouse Wills
Transferable NRB
These inheritance tax (IHT) rules apply for anyone passing away on or after 9th October 2007. If they had been previously widowed (at any date) and their late spouse did not exploit all of their own IHT-free allowance (the ‘NRB’ or the equivalent for the tax rules that applied at the time) then the unused proportion of the allowance can be transferred to offset IHT on the 2nd estate.
What does that mean? Well, for most married couples (or legal Civil Partners) it means that the first to pass away can leave everything to the survivor and then the survivor’s estate can use both NRB allowances to offset against IHT (that is a total of £650,000, based on the current level of the NRB).
As ever with tax rules there are regulations around this and it does NOT happen automatically. The Executors on the 2nd estate have to claim the transfer. They have to prove that the 1st estate did not use its NRB, which means that they need the paperwork from the administration of the 1st estate. All too often this paperwork is minimal and perhaps was not kept at all. Therefore it is all the more important to handle probate and estate administration carefully and this places an extra burden on whoever acts as Executor - even when it is simply a couple leaving everything to each other.
Even if the Transferable NRB does save IHT, it does nothing to protect family assets against other attacks. That is why it is still important to make appropriate Wills, such as with Trusts, to protect your family’s inheritance.
There are special circumstances where it is possible for a couple exploit 3 or even 4 NRB allowances - i.e. where either or both of the couple have been previously widowed from an earlier marriage and their first spouse did not exploit their NRB allowance and the couple now create special Wills with IHT-saving trusts in them. If you think this could apply to you then you definitely need our detailed advice.
Transferable NRB
When the IHT rules were changed many newspapers said that the Nil Rate Band for couples had doubled. That was misleading and could cause any families to miss out on their full inheritance.