The new IHT rules apply for anyone dieing on or after 9th October 2007. If they had been previously widowed (at any date) and their late spouse did not exploit all of their own IHT-free allowance (the ‘NRB’) then the unused proportion of the allowance can be transferred to offset IHT on the 2nd estate.

As ever with tax rules there are regulation around this, but for most couples it means that the first to go can leave everything to the survivor and then the survivor’s estate can have 2 NRBs available to offset against IHT.

A critical factor is that this transfer does NOT happen automatically. The Executors on the 2nd estate have to claim the transfer. They have to show that the 1st estate did not use its NRB, which means that they need the paperwork from the administration of the 1st estate. So often this paperwork is minimal and perhaps was not kept at all. Therefore it is all the more important to handle probate and estate administration carefully and this places an extra burden on whoever acts as Executor - even when it is simply a couple leaving everything to each other.

Even if this change is successful in saving IHT it does nothing to protect family assets against other attacks. That is why it is still important to make appropriate Wills, such as with Trusts, to protect your family’s inheritance.

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