The maximum amount available to any individual estate eligible to claim the unused NRB is 100% of the then current NRB – so for 2007/08 £600,000 and for 2010/11 £650,000, ie the deceased’s NRB plus the unused NRB. Where a person dies having survived one or more spouses or civil partners this limit still applies although it may be accumulated up to 100%. For example, a widow who survives two husbands can utilise any unused nil-rate band from the estate of each deceased spouse up to a maximum of 100% of the current NRB.

Example

Joan marries Jack Johnson. Unfortunately Jack dies leaving 50% of his NRB unused. Joan remarries some years later to Peter Parks. Peter also predeceases Joan leaving 75% of his NRB unused. On Joan’s death, her executors are able to utilise her NRB of £325,000 (2010/11) and 50% of Jack’s and 50% of Peter’s giving a further £325,000 NRB.

When completing a claim form there are two parties generally referred to, ’the spouse or civil partner’ and ‘the deceased’.

The following example will help to identify who these parties are.

John and Mary Smith are married. John Smith died on 1 December 2005 only using 40% of the available NRB at that time. For the purposes of this example he would be regarded as ‘the spouse or civil partner’. Mary Smith died on 1 November 2009 with an estate worth £750,000. For the purposes of this example she would be referred to as ‘the deceased’.

Form IHT 400** will be required on the second death (Mary Smith in the example). There will be a requirement to keep sufficient records including copy documents from the first death (John Smith in the example above) to enable a claim to be successfully processed, as any claims to transfer any unused NRB amounts will usually be made by the personal representatives of the estate of the last spouse or civil partner to die when they make an IHT return.

• To make a valid claim, both IHT 400 and IHT 402** would need to be completed including all supporting documents to make the claim.
• The supporting documents would include copies of:
      – The death certificate for the first to die.
      – The marriage certificate or civil partnership certificate for the couple.
      – If the spouse or civil partner left a will, a copy of it.
      – The grant of representation/confirmation in Scotland.
      – Any deed of variation or similar documentation.
• A claim must usually be made within 24 months from the end of the month in which the survivor dies.

For estates where the spouse or civil partner died some time ago, obtaining documents to support the claim may prove difficult. The onus, however, will be on the personal representatives to prove there is a valid claim to be made.

Additional information which would aid any claim by the surviving spouse or civil partner’s personal representatives include:

• HMRC return for the first spouse or civil partner (IHT 400 or IHT 402 or forms C1 and C5** in Scotland).
• Any valuations of assets that pass under the will (or intestacy) other than to the surviving spouse or civil partner covered by the spouse exemption.
• Any evidence to support the availability of relief (such as agricultural or business relief) where assets pass to someone other than the spouse or civil partner.

In addition to the above, there may be other assets or relief received, about which the personal representatives will need to pass on further information to validate the claim. Previous gifts, life interests in trusts and pension assets are areas which need consideration.

The spouse exemption is limited to £55,000 where the surviving spouse is non-UK domiciled. They can benefit from a NRB and can claim any amount of unused NRB.

This change offers a clear opportunity for widows and widowers whose spouses did not fully use their nil-rate bands on death. Although requiring additional work, the benefit could be significant.

Additional information is available via the HMRC website, including further guidance and frequently asked questions.

* As defined by the Civil Partnership Act 2004
** Available from www.hmrc.gov.uk