A testator (H) has been married twice. First wife (W1) died during the marriage. She left everything to H with no lifetime gifts.
H has just died whilst married to second wife (W2).
Assets of £320,000 pass to Hs children as per terms of will.
I am just considering the incidence of the available allowances.
As I understand it, we can use W1’s NRB of £325,000 to reduce the gift to the children to nil. Does it matter in which order we claim these? I would consider it is preferable to use W1s first?
Presumably, H’s NRB (no lifetime gifts) is then fully available to be able to deduct against W2’s estate on her death?
Does this mean that W2 could vary Hs estate now and pass further assets up to value of Hs NRB? Of course, if W2 does it now, it won’t be available on W2’s death?
Also, how would the RNRB work in relation to this? W2 has inherited the property. Presumably on her death (given she wishes to pass this to the stepchildren) 2 RNRBs can be deducted ie that of H and W2? Is W1s RNRB lost?
I should be most grateful for any thoughts/comments regarding this.
In a situation like this there are up to three NRBs and three RNRBs to be used however no-one is allowed to use more than two of either on their death.
H is using almost a whole NRB but (depending on the total value of the joint estate) it may be worth using his RNRB as well since the widow will only be allowed to claim up to two RNRBs on her death (and the third would be lost).
If W is unlikely to remarry than you don’t need to worry about using more than one NRB and one RNRB on H’s death. If W were to remarry then there could be the possibility that someone (her or her new husband) would have up to four NRBs and RNRBs to claim but as noted no more than double the allowances can be claimed. In that situation you might want to use all H’s allowances (including brought forward allowances). Of course it also depends on the total value of the estate, and practical considerations (particularly where the RNRB is concerned).
It won’t be appropriate to claim the late widow’s allowances on H’s death, because it won’t be relevant to the IHT payable on his death. You can just use ‘his’ allowances. The claim for the ‘extra’ allowance will be made on W’s death. However it would make sense to have all the necessary records (in relation to H’s late wife) to substantiate the claim for allowances on W’s death.
Paul Davies
Clarke Willmott