Please would someone familiar with this issue clarify for me how to treat the non dom (sic) spouse in this scenario?
Husband is born of Scottish parents and apart from working abroad in West Africa throughout his working life would nevertheless appear to be UK domiciled for IHT purposes - although since retirement 3-4 years ago, he is now based in Senegal and lives there for all but the rainy season (about three months). He married a Congolese lady in February who has just begun her spouse visa application to the UK envisaging indefinite leave to remain in 5 years’ time.
He has say £700,000 assets in UK and £350,000 assets in Senegal, all in his sole name. We shall probably make separate UK and Senegal Wills.
Does the lady qualify for the 2013 spouse exemption of £325,000? I assume so but of course, if not, why not?
When would she be free of the restriction to £325,000 ie (I assume) be regarded as UK domiciled and he entitled to unlimited spouse exemption? Will it still depend upon the particular facts and where she resides etc or is there a settled approach to this that would enable me to assure the client that the full spouse exemption would be available after a fixed time or given and definable event?
UK is to go to daughter as to £300,000 and remainder to spouse. Executors would be responsible for the IHT on worldwide assets but would have enough to pay the legacy and the tax and some left over to go to spouse. The whole of Senegal estate would be left to spouse in Senegal Will.
I shall much appreciate any comments, guidance and clarification of any misunderstanding I may have.
I’m not sure why you think husband is still UK domiciled. If he was born with a UK domicile of origin but left the UK to work abroad for most of his working life a and has now settled in Senegal then he may well have acquired a non-UK domicile of choice, quite possibly in Senegal. This would require that he resides there and has an intention to reside there indefinitely.
If, however, he retains his UK domicile of origin and his wife possesses a non-UK domicile then any inter-spouse transfer from husband to wife would be exempt up to £325k.
The wife could acquire a UK domicile of choice (and hence no limit on inter-spouse transfers assuming husband has retained his UK dom or origin) were she to reside in the UK with the intention of residing there indefinitely (or were she to find herself “deemed” domiciled).
Alternatively, the wife could elect for UK domicile status.
I would be inclined to examine in detail whether in fact the husband has acquired a non-UK domicile of choice. If he has then there is no 325k inter-spouse restriction. This is probably the 'best" option. If he hasn’t and is unlikely to do so in the future (ie remains UK domiciled) in addition to the 325k inter-spouse exemption from husband to wife he is also entitled to the 325k nil rate band and possibly a residence nil rate band.
Transferring UK assets to wife and then moving assets outside UK should be considered.
Just to follow up on Malcolm Finney’s observations – the exemption of £325,000 for UK dom spouse to non-UK dom spouse is a cumulative lifetime exemption. Even if the non-UK spouse becomes UK domiciled at any time, the previous inter-spousal transfers of value will still stand and may reduce the husband’s available NRB should he die within 7 years of the wife acquiring a UK domicile (whether actual or deemed).
As Malcolm identifies, the above is predicated on the husband having a domicile within the UK which, based upon the information provided, is not necessarily a clear cut position.
Thank you both very much for the observations and discussion. I do take the point about his having a domicile of choice which concerned me. I shall advise caution and provisionally, absent his inclination to pursue it on costs grounds! David Martin.