The Inheritance Guide

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Nil Rate Band

Example:

Mr Joseph Jones died in 1995 and the net value of the estate after deductions of liabilities was £100,000. Mr Jones left everything to his wife Sandra apart from leaving £5k each to his 2 grandchildren.

What was the net qualifying value for the excepted estate? = £10,000 (the 2 x £5,000 gifts to the grandchildren. The entitlement for the wife Sandra is exempt)

What was the net Probate value of the predeceased spouse? = £100,000 (after deductions of liabilities)



Calculating the threshold available to transfer

To calculate the value of the Inheritance Tax threshold which can be transferred, the unused percentage of the first spouse or civil partner’s nil-rate band is used, and not the unused amount. Any gifts made to a spouse are free from Inheritance Tax, so if the whole estate was left to the surviving spouse, 100% of the threshold was unused. Any gifts, made during the deceased’s lifetime, which were not free from Inheritance Tax, should be deducted from the threshold, before working out the percentage available to transfer.



What you need to do

You will need to determine whether the predeceased spouse used any of their inheritance tax threshold. This can be obtained from the Grant of Probate value and should be entered into the field: "What was the net value of the estate for the predeceased spouse (as stated on the Grant of Probate)?"

If any value of the inheritance tax threshold was used by the predeceased spouse then you will need to itemise



Information you will need

You will need to know:

  • who benefited under the Will or intestacy of the spouse or civil partner who died first and what the beneficiaries (not including any assets that went to spouse/civil partner) were entitled to receive
  • whether any assets, such as jointly owned assets, were part of the estate of the spouse or civil partner, and
  • whether the spouse or civil partner had made any gifts or other transfers within seven years before the date of their death

The executor or administrator of the spouse or civil partner should be able to help with this information.


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