8th June 2016
Inheritance Tax and the New Residence Nil Rate Band
Question: I am a widow and have been left financially comfortable on my husband’s death a few years ago.
I am concerned about Inheritance Tax (IHT) on my death for the children, particularly regarding the value of the house, as it seems to have increased a lot from the price we paid for it. I have heard about the new Residence Nil Rate Band (RNRB) – can it help me, and can we claim for my late husband as well?
The answer to the first question is yes, it can help, as long as your estate is not worth more than £2million (for those over there is a sliding tapering removal of the relief above that value). You must have a property you live in as a residence which, on your death, is giving rise to an IHT issue, and you must survive to at least 6/4/2017, and in addition you must leave the property to lineal descendants whom could include your step children. Then the relief is worth an additional £100,000 of sheltered value from IHT on your own demise.
To the second question, the answer is also yes. The hurdle is for you to outlive the 6/4/2017 point; if you do, then your late husband will, for these tax rules, be treated as dying in the same tax period as you eventually pass during, and therefore the relief available is doubled to £200,000 should you die between 6/4/2017 and 5/4/2018 and so forth. The figure is subject to the sliding removal of relief for estates worth more than £2million.
Interestingly your late husband does not have to have had an interest in the property as you have to have had, for you to qualify for the transfer of his RNRB, nor does his share of the property have to have passed to the children on his death. In actual fact, if RNRB and standard NRB maximisation are the only concerns when it comes to will drafting and asset destination, then leaving everything to you either outright or on a life interest will probably be the most attractive options for your husband to have given instructions for in his Will. The odd thing is that you should be able to claim his RNRB even if he died owning no financial assets at all.
The one thing that the RNRB is not, then, is simple.
To discuss inheritance tax with one of our experts, contact Edward Walter on ewalter@bussmurton.co.uk or 01892 502 320.
Edward Walter
Partner
Solicitor
Private Client
Office : Hello world!
01892 502 320ewalter@bussmurton.co.uk
Profile
Edward is a Partner in the Private Client Department. He started practising Private Client Law in 2000, initially as a solicitor in a well-known firm in Tonbridge and thereafter with several well-known East Sussex firms before joining Buss Murton in July 2014. Edward became a Partner in 2015.
He advises and acts on all aspects of Inheritance tax planning and Capital Gains tax planning. He also acts in Probate administration matters and post death Variations for Inheritance tax and Capital Gains tax purposes. He also regularly advises clients regarding the making of their Wills, Powers of Attorney, Lasting Powers of Attorney, Declarations of Trust with respect to client’s properties.
He undertakes the full range of advice and work with respect to Trusts and advises on associated tax implications of those actions. He also advises generally on (tax) domicile and residence issues.
He regularly advises and acts on the registration of Lasting and Enduring Powers of Attorney, the making of Statutory Wills and gift applications at the Court of Protection.
Expertise
Inheritance Tax Planning
Capital Gains Tax Planning
Wills
Probate and estate administration
Lasting Powers of Attorney
Declarations of Trust
Court of Protection
Estate Planning
Taxation advice
Succession strategies
Residence and domicile matters
Trusts
Alternative Contact:
Emily Luker
01892 502 346
eluker@bussmurton.co.uk
Beth Ahsunollah
01892 502 348
bahsunollah@bussmurton.co.uk
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