This essentially means that any part of the Nil Rate Band that was not used when the first spouse or civil partner died can be transferred to the surviving spouse or civil partner for use on their death.
These changes apply to deaths after the 9th October 2007, where the Deceased’s spouse or civil partner has died before them. Any part of the Nil Rate Band which has not been used can be brought forward.
The current Nil Rate Band is £300,000 and set to rise to £312,000 in 2008/09.
Everyone is entitled to a Nil Rate Band for Inheritance Tax purposes. When assets pass from one spouse or civil partner to another they are exempt from Inheritance Tax (this is known as the spouse exemption). The unused Nil Rate Band on the first death can be transferred to the surviving spouse or civil partner and used on their estate when they die and used to work out any Inheritance Tax liability.
In order to claim a transfer of the Nil Rate Band the Executors, will need to show the HM Revenue and Customs evidence of assets and liabilities and beneficiaries of the estate of the first spouse or civil partner. It is therefore important to keep documents and records relating to the first spouse or civil partners estate.
Over the years, the use of ‘Nil Rate Band Discretionary Trusts’ in Will drafting has allowed married couples to make use of both Nil Rate Band. Such drafting in Wills might not be necessary if you wish to decrease your Inheritance Tax liability.
The introduction of the Transferable Nil Rate Band will not change the effect of existing ‘Nil Rate Band Discretionary Trusts’ Wills. If you already have Nil Rate Band Discretionary Trusts in your Wills, it is advisable to keep them. If the Trust is not required when necessary, then it need not be used.
If you do wish to take account of the new changes a Codicil can be used, rather than rewriting your Will.
For further information on this matter, please do not hesitate to seek legal advice from Michael Ward Head of the Wills, Probate and Tax department.
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