Mark McLaughlin warns of a potential IHT problem when dealing with ‘nil rate band’ legacies in wills.
The inheritance tax (IHT) allowance (or 'nil rate band') (£325,000 for 2021/22) is generally available to individuals. For married couples (and civil partnerships), the transferable nil rate band (TNRB) rules broadly allow claims for unused nil rate band of a deceased spouse (or civil partner) to be transferred to the survivor.
The survivor's nil rate band can be increased by up to 100% or one additional nil rate band. Thus, a surviving spouse's nil rate band can increase to a maximum of £650,000 (n.b. ‘residence nil rate bands’ are not considered in this article).
Some individuals have wills with legacies (e.g. to a family discretionary trust) up to the amount of their