Overlooking available tax relief
Executors are often not aware that they’re able to claim the predeceased spouse’s NRB. In Ray Green’s case we’d review his wife’s estate and, in this scenario, Mrs Green hadn’t used any of her NRB when she died, everything had passed to Ray under the spouse exemption. This meant there was an additional £325,000 NRB to reduce the IHT liability by £130,000.
Where there’s a property in the estate, we review whether the RNRB relief criteria are met. In this scenario, as the criteria were met, it meant the executors could claim the RNRB (£175,000) for Ray. As Mrs Green died before 6 April 2017, she could not have used her RNRB either, but the executors could claim the Transferable RNRB as well (another £175,000). As a result of our advice, the executors/beneficiaries would benefit from a further IHT saving of £140,000.
We also review any charitable donations and, in this scenario, Ray’s will left almost 10% of his entire estate to Cancer Research. We’d advise the executors that by increasing the donation by £15,000 the estate would benefit from the reduced IHT rate of 36%. This would result in a further saving of £59,800 of IHT, so a net benefit to the family of £44,800.
Ray had several investments with a combined value of £100,000 that were listed on the Alternative Investment Market. We’d review these investments and confirm if they qualified for 100% Business Property Relief (BPR), which in this case saved the executors £40,000 of IHT.
The executors sold the portfolio of investments within 12 months of their father’s death to pay part of the IHT liability. Unfortunately, the investment markets had fallen during the year. In this scenario, we’d review the gains and losses on all the sales of the quoted equity investments, including those in his ISA which are subject to IHT, and advise the executors to make a loss relief claim. This would save £23,600 of IHT.