Inheritance Tax – Transferable Nil Rate Band Allowance Explained
Inheritance Tax legislation now allows for a person’s unused ‘nil rate band’ allowance to be passed onto to their surviving spouse. The ‘nil rate band’, also known as the inheritance tax threshold is currently £325,000 for the tax year 2009/10 and therefore the current ‘nil rate band’ allowance is £325,000.
If a person leaves an estate valued at £500,000 and gives £25,000 to each of his two children and the remaining £450,000 goes to his widow, then £50,000 of his ‘nil rate band’ allowance would have been used; or in other words, approximately 15%.
This remaining 85% of the deceased’s ‘nil rate band’ allowance can be passed on to his wife. This means that when she dies, her ‘nil rate band’ allowance of £325,000 would be increased to £601,250.
One must be aware however, that it is up to the claimant to apply for the transfer of any remaining nil rate band allowance. Upon doing so they must be able to show, by keeping proper records, how the estate of the husband was divided up in order to claim any remaining nil rate band allowance.
Any unused nil rate band allowance can be claimed for regardless of when the first partner died, but without any proper records detailing exactly how their estate was distributed could jeopardise the claim. Also, the second partner must have lived until at least 1st October 2007 for a valid claim to be made.
It should also be noted that only married couples or those in a civil partnership will benefit from this legislation. So unmarried and non-civil partnership couples and siblings living together will not be able to take advantage of the transferable nil rate band allowance.
Andrew Hall of Trust Inheritance commented:
“Trust Inheritance are a trust corporation specialising in Estate Administration. We also provide a home visit Will drafting Service. My advice would be for anyone taking on the administration of an estate to take professional advice both before and during the process to ensure they have carried out their duties correctly as they will be personally liable for any errors or omissions. It is vital that correct records are kept on first death in order to secure the additional relief on second death. Trust Inheritance provides a number of levels of service ranging from pay as you go advice trough to full estate administration.”
Trust Inheritance was founded in 1990 and has been providing Will writing and Estate Planning services and advice for 1000’s of clients throughout the UK. For more information call 08000 978 012 or visit http://www.trustinheritance.com