IHT - Transferrable nil-rate allowance before 1975

Spelunthus

A friend's father has just died. He was a widdower, and his wife died in 1968. When she died, she had no assets of any substance, left no will, and everything passed to her husband.
I'm trying to understand what proportion of the late wife's IHT nil-rate band may now be transferrable to the husbands estate. The husband's estate exceeds the single allowance of £325,000.

The HMRC website says the full £325,000 from the wife may be transferrable but adds " "if the death was before 1975 then the full nil rate band may not be transferrable as the amount of spouse exemption was limited then..."

Please, can anyone point me to where I can determine how much of the late wife's allowance CAN be transferred to the husband's estate in these circumstances?

CaptainAmerica

I can't answer your question personally, although I'm sure some on here can, but I have found this on the interweb which may help a little.




First death before 18 March 1986
18. Inheritance tax was introduced with effect from 18 March 1986, but before this date other estate taxes (Capital Transfer Tax and Estate Duty) applied. Where a surviving spouse dies on or after 9 October 2007 and their spouse died before the introduction of the current inheritance tax provisions, a claim may still be made for the nil-rate band of the surviving spouse to be increased by reference to unused allowances of their spouse.


19. Where the first spouse died between 13 March 1975 and18 March 1986 then the estate would have been subject to Capital Transfer Tax. Any transfers to the spouse would have been exempt from tax in the same way as the under the current rules. The transfer of nil-rate band provisions will operate in these cases in the same way as it works for inheritance tax. So that if on the death of the first spouse all their estate was transferred to their surviving spouse, then a claim may be made on the death of the surviving spouse to increase the nil-rate band by 100%.


20. Before 13 March 1975 Estate Duty applied. Under Estate Duty there was no tax-free transfer permitted between spouses until 21 March 1972 when a tax-free transfer between spouses of up to £15,000 was introduced.


21. Where the first spouse died between 21 March 1972 and 13 March 1975 a claim to transfer the nil-rate band to the surviving spouse will be based on the amount of the tax-free band that was unused on the death of the first spouse. For example, a husband died in 1973 and left an estate valued at £10,000, which was all transferred to his wife. As this was all within the spouse’s exemption, the individual tax-free band was unused. In this case the full amount of that allowance may be transferred, and a claim may be made on the death of the surviving spouse to increase the nil-rate band by 100%.


22. Where any part of the first spouse’s individual tax-free band was used then there will be a proportionate reduction in the amount by which the nil-rate band of the surviving spouse may be increased.


23. Similarly, where the first spouse died before 21 March 1972 the transfer of nil-rate band will be based on the proportion of the individual tax-free band that was unused on the death of the first spouse. However, as there was no relief from Estate Duty for transfers to spouses, any transfer made on the death of the first spouse will use up part of the tax-free band and so reduce the amount by which the nil-rate band of the surviving spouse may be increased.

CaptainAmerica

I also believe Estate Duty threshold in 1968 was £5000.

madbadrob

In the above post I think the last point is the one you have to work with. I have been unable to find an exact figure for Estate Duty Threshold but I recollect £5k. CAB may be better placed to answer this. They have rep's on here

Rob

John_Pierpoint

http://www.hmrc.gov.uk/rates/iht-thresholds.htm

Sorry to be brutal but they have died the wrong way round.
If only the "old boy" had given his wife a half share of the assets to leave to him, there might have been a happier outcome.

My father died in similar circumstances in 1967 and my mum died before the transferable nil rate band legislation of 2007. There was in '67 a business worth £5,800 and a house worth £12,500 (because it was covered by a mortgage protection policy), so there was a bit of estate duty to pay.
Very painful at the time as there was no cash what so ever.
We converted the business into a devaluing pension for mum as the value was almost exactly the same as the intestacy rights of the widow.
Half the house legally belonged to the children and there was only a life interest in the other half belonging to mum. [In practical terms mum went out to work as did sister and I and somehow we serviced the estate duty liability.].
Just about 40 years later, I was able to argue that my father's estate had already paid its intergenerational tax and mum's own personal allowance was intact to put towards her personal estate. Result no tax to pay at all.

How big is the estate?

I had some difficulty proving my version of events, as HMRC seemed to have lost their records, but fortunately mine (from when I was 21) were in a bin bag in the loft - backed up by my observation of "Why did you put a legal charge on our house, when my father died penniless and we did not owe you any money?" (yes 40 years later the firm of solicitors had disappeared the but the legal charge was still there). If you extract a copy of the wife's grant of probate, you might find that HMRC will accept the figure scribbled on there as proof of her net worth at death.

Spelunthus

Thanks for all these comments. I'm still struggling to understand..
In 1968 (from HMRC tables) the wife had an "Estate Duty" threshold of £5000. Since she had no assets, and everything joint would pass to husband in 1968, then I assume that this allowance is "unused". There is probably NO tax or probate documentation surviving from 1968 - what documents would there be in this case anyway ?

Does this mean, in 2013, that the husband (who has just died) gets that additional £5000 added to his £325,000 allowance, or does he get 100% of an additional £325,000 from the late wife (because she did not use any of her Estate Duty allowance in 1968).

I appreciate any comments, obvously this will have to go to solicitor/tax expert/HMRC for resolution. but it would be nice to have a layman's sanity check. The total husband's estate is about £600,000.

eddtheduck

Does this mean, in 2013, that the husband (who has just died) gets that additional £5000 added to his £325,000 allowance, or does he get 100% of an additional £325,000 from the late wife (because she did not use any of her Estate Duty allowance in 1968).

It means 100% of an additional £325,000 - it's the percentage of the allowance that was unused on the first death that counts, not the actual amount of the allowance at that time.

joerugby

The guidance on the website is not clear to me

I'd give the helpline a call

http://search2.hmrc.gov.uk/kb5/hmrc/contactus/view.page?record=Ve4W32E6kds

John_Pierpoint

Spelunthus wrote: »

Thanks for all these comments. I'm still struggling to understand..
In 1968 (from HMRC tables) the wife had an "Estate Duty" threshold of £5000. Since she had no assets, and everything joint would pass to husband in 1968, then I assume that this allowance is "unused". There is probably NO tax or probate documentation surviving from 1968 - what documents would there be in this case anyway ?

Does this mean, in 2013, that the husband (who has just died) gets that additional £5000 added to his £325,000 allowance, or does he get 100% of an additional £325,000 from the late wife (because she did not use any of her Estate Duty allowance in 1968).

I appreciate any comments, obviously this will have to go to solicitor/tax expert/HMRC for resolution. but it would be nice to have a layman's sanity check. The total husband's estate is about £600,000.

In my layman opinion, I think you will be OK. BUT back in those days the concept of avoiding death duties, by leaving stuff to spouse, did not exist. Mum went ballistic, when some poor little man turned up with a clip board saying he had been sent to make an inventory. The woman thinks she owns the contents of the nest.
Was probate/letters of administration ever taken out for the wife? If it was then a copy of the certificate might be enough especially if you can demonstrate that the wife had almost nothing of her own.
What was her "career"?
Any serious work work between leaving school at 14 (?) and getting married?
Any inheritances, post war credits etc.etc?

Spelunthus

Thanks to you all for these helpful comments.

I don't know a lot of the answers, but will pass the comments back to the family. At least we now know that there is a POSSIBILITY that the recently deceased husband may have (up to ) two IHT nil-rate allowances.Thus, the family can direct the solicitor who will execute the will.

It would be usful if the late wife had left a will, but it is very unlikely. I doubt that there is ANY remaining documentation from 1968 other than the death certificate. This was a simple and plain family, with no fancy financial arrangements, trusts, busineses etc.