Currently most transfers of property between spouses or civil partners are exempt from IHT. This means that when one partner dies leaving some or all of their property to their spouse/civil partner they may not make full use of their own nil-rate band.
However, it is possible to transfer unused nil-rate band allowances between spouses or civil partners. The rules apply to allow a claim to be made to transfer any unused IHT nil-rate band on a person’s death from the estate of their deceased spouse/civil partner where the second death occurs on a certain date.
The amount of the nil rate-band potentially available for transfer will be based on the proportion of the nil-rate band unused when the first spouse or civil partner died.
Any claims for transfer of unused nil-rate band amounts can be made by the personal representatives of the estate of the second spouse or civil partner to die when they make an IHT return. The rules apply to all surviving spouse/civil partner estates, including those when the death of the first spouse/civil partner occurred prior to that date.
If you still retain a nil rate trust you should check to ensure that this is still appropriate – it is possible that your estate could be liable for more tax if this has not been reviewed.
Although nil rate band trusts are largely of limited use, they can still be tax-effective to shelter the gain for an asset expected to gain significantly in value, such as a business or a property.