Examples illustrating how three nil rate bands can be achieved
Gilbert died in 2007/08 leaving everything to his spouse Harriet who later married Ivan. Harriet dies when the NRB is £325,000 and pre–deceases Ivan. Under the transferable NRB provisions her NRB will be increased to £650,000. She leaves everything to Ivan who subsequently dies when the NRB is still £325,000. On Ivan’s death, the uplift is restricted to 100% – £650,000. In other words, Gilbert’s NRB has been wasted.
Instead of leaving everything to Ivan, Harriet could have left £650,000 to a discretionary will trust including Ivan as a potential beneficiary. There will be no transferable NRB on Ivan’s death but the net effect is that three NRBs have been used rather than two.
- 2 x NRB utilised on death of Harriet – NRBs of Harriet and Gilbert
- 1 x NRB utilised on death of Ivan – NRB of Ivan
Now, let’s change the circumstances and assume that Ivan dies before Harriet.
Gilbert died in 2007/08 leaving everything to his spouse Harriet who later married Ivan.
Ivan dies when the NRB is £325,000 and pre–deceases Harriet. He leaves everything to Harriet who subsequently dies when the NRB is still £325,000. On Harriet’s death, the uplift is restricted to 100% – £650,000.
Instead of leaving everything to Harriet, Ivan could have left his NRB to a discretionary will trust including Harriet as a potential beneficiary. Again the net effect is that three NRBs have been used rather than two.
1 x NRB utilised on death of Ivan – NRB of Ivan
2 x NRB utilised on death of Harriet – NRBs of Harriet and Gilbert