IHT Transfers Between Spouces or Civil Partners

The IHT rules have always provided that where assets pass on death from one spouse or civil partner to the survivor, the transfer is exempt from IHT irrespective of the amount involved. So if the whole estate passed on the first death, the estate of the first spouse or civil partner would not use any of the IHT nil rate band and, on the second death, the IHT bill would be higher than it needed to be.

Duncan died in August 2003 and left all his £600,000 estate to his widow Eunice. When she died in May 2007 the estate totalled £800,000. The IHT payable on the combined estate would be nil on Duncan’s death and £200,000, being (£800,000 - 300,000) x 40% on Eunice’s death.

IHT planning for the couple would have concentrated on using the nil rate band on Duncan’s death, by leaving up to the amount of the nil rate band to either the children or into a trust arrangement. This would have potentially saved a considerable amount of IHT (at today’s rates, £300,000 x 40% = £120,000!).

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Please contact us to discuss any of the matters raised

In this issue

Inheritance Tax Special - Summer 2008

IHT Transfers Between Spouces or Civil Partners

Please
contact us to discuss any of the matters raised