New legislation on IHT

Date Posted: 16/07/2008

In the Budget significant changes were made to the Inheritance Tax rules for married couples and couples living with civil partnerships. Under the old Inheritance Tax rules, it was common practice to provide that on the death of the first spouse their Nil Rate Band would be left to a "Nil Rate Band Discretionary Trust" for the benefit of the surviving spouse and their children. This was done to prevent the whole of the combined estate passing to the surviving spouse with the result that the Nil Rate Band (£312,000) of the first spouse to die was wasted.

Following the Chancellor's announcement, it would seem that where the first spouse to die has had all (or a proportion) of their Nil Rate Band available at their date of death it can be transferred to the survivor. The relevant Nil Rate Band is that applicable at the date of the second death, rather than the first. For example, if a surviving spouse dies in 2010/11 and the predeceased spouse's Nil Rate Band was unused then the total available Nil Rate Band will be £700,000.00. By Wills Direct Northampton.