We have a scenario with a widow and widower who each received the NRB and RNRB from their deceased spouses. They each have their own NRB and RNRB, so on their passing they each could have an allowance of
£1million. However, they are considering getting married. As I understand it, if they did they would lose their deceased spouses’ NRBs and RNRBs, and would only have their own. So on their passing their allowance would then only be £500k each. Although this could be transferred to each other and they could transfer assets inter spousal free from IHT, they could be potentially be much worse off. I’d welcome comments on this.
If they have children, it is conceivable that £2m of NRB/RNRB will be available after they are married.
On the first death, spouse 1 needs to use up the double NRB and double RNRB available to that spouse (eg leave a £350k share of a residence to their children/step-children* plus a legacy of £650k to them or on discretionary trusts, as we used to do before NRB could be transferred). In that way, spouse 1 leaves no NRB/RNRB to transfer.
Spouse 2 already has a double NRB and RNRB and ensures that that double NRB & RNRB is used up on their death in the usual way.
It is likely to be harder to use up the double RNRB on first for most people, without giving the deceased spouse’s children / step-children* an interest in the house that the survivor is probably living in, which is not terribly satisfactory, but it can be done. If there is a second property or downsizing relief is available, then it may be easier.
*section 8K Inheritance Tax Act 1984 provides more options of who may inherit and still claim the RNRB
Paul Davidoff
New Quadrant
There is no such loss. See IHTA 1984 s8G. However, any TRNRB/TNRB is restricted to 100% of the RNRB/NRB.
Malcolm Finney