Spouse exemption on life tenant's death

Trusts Discussion
1

Morning TDF

We are dealing with the apportionment of IHT on the death of a life tenant (i.e. free estate v IIP Trust).

The life tenant remarried during the lifetime of the IIP Trust and his entire free estate passes to the widow.

We assume but cannot find any authority to confirm that the spouse exemption serves to reduce the tax payable by the free estate only i.e. that it is applied in the same way as BR etc to reduce the value of the “net estate” rather than applied across the “aggregated estate” in the same way as the NRB and RNRB?

Thanks in advance

2

Apportionment of the IHT is based upon the taxable transfer of value of each of the aggregable titles.

As the free estate is wholly exempt, its taxable value is nil. Accordingly all the IHT is payable out of the trust fund.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals