Transferring wealth between
your spouse or civil partner

New rules could mean up to double the Inheritance Tax allowance is available

New rules mean that the survivor of a marriage or civil partnership can benefit from up to double the Inheritance Tax allowance £650,000 for 2009/10 tax year, increasing to £700,000 by 2010/11, in addition to the entitlement to the full spouse relief.

Inheritance Tax is only paid if the taxable value of your estate when you die is over £325,000 (2009/10 tax year). The first £325,000 of a person’s estate is known as the Inheritance Tax nil rate band because the rate of Inheritance Tax charged on this amount is currently set at zero per cent so is free of tax.
 
Where assets are transferred between spouses or civil partners, they are exempt from Inheritance Tax. This can mean that if, on the death of the first spouse or civil partner, they leave all their assets to the survivor, the benefit of the nil rate band to pass on assets to other members of the family, normally the children, tax-free is not used.

Where one party to a marriage or civil partnership dies and does not use their nil rate band to make tax- free bequests to other members of the family, the unused amount can be transferred and used by the survivor’s estate on their death. This only applies where the survivor died on or after 9 October 2007.

In effect, spouses and civil partners between them now have a nil rate band that is worth up to double the amount of the nil rate band that applies on the survivor’s death.