In Inheritance Tax (IHT), allowances and reliefs are available individually to each taxpayer. Because transfers of assets between spouses or civil partners normally have no tax consequences for IHT purposes, it is easy to fall into the trap of thinking that there is nothing which needs to be done when doing so or when passing over the unused proportion of the IHT ‘tax-free’ allowance in the event of one partner’s death. However, when the estate of the last surviving partner has to be administered, specific documents are required.
HM Revenue and Customs have now issued guidance on the procedure for claim of the balance of the IHT nil rate band on the death of the second spouse or civil partner, which makes the retention of these documents important.
The personal representatives of the deceased will be required to supply the claim accompanied by the following documents relating to his or her late spouse or civil partner:
• the death certificate;
• the marriage or civil partnership certificate;
• a copy of the grant of representation (confirmation, where the deceased died in Scotland);
• the will (if any); and
• any deed of variation.
It is widely thought that the ‘excess’ of unused transfers (i.e. the difference between the transfers made and the ‘nil band’ at the date of death) simply passes across to a surviving spouse or civil partner, but this is not the case. The way the transfer works is quite different.
It is recommended that the required documents are assembled and stored in a safe place with your will.