"without incurring any liability to IHT on my death " who?

Dear All,
PETs having been judged to be exempt, the residuary beneficiary and Clause X beneficiaries are now disputing which of them should carry the burden of Estate IHT.

Clauses X and Y read:
‘X. a) I give to A and B and C and D and E equally the Nil Rate Sum

b) The “Nil Rate Sum” means the maximum amount of cash I can give on the terms of this clause without incurring any liability to inheritance Tax on my death and for the avoidance of doubt I declare the “Nil Rate Sum” shall not include any residential Nil Rate Band nor Nil Rate Sum which shall be transferable from the estate of another person
c) Any other legacy given by my Will or any codicil should be paid in priority to the Nil Rate Sum

Y. My Trustees shall hold the rest of my estate on trust to retain or sell it and

(a) (i) to pay depts and executorship expenses

(ii) to pay any inheritance tax in respect of property passing under this Will

(b) to pay the residue to my son F’

The Clause X beneficiaries assert that Clause X does not mean that IHT is deducted from the Clause X gift, and that all IHT should be deducted under Clause Y reducing the residuary share.

The residuary beneficiary asserts that Clause X means IHT should be deducted from the Clause X gift and that the inclusion of the word “rest” and reference to IHT in Clause Y define where IHT should be taken from if it exceeded the value of the Clause X “Nil Rate Sum”.

I had assumed and context suggests the latter but would like your opinions to double check.

Many thanks.
Nicholas Russell

If IHT is payable in the estate, the NRB legacy fails, as even if it is reduced to £1, there is still IHT payable in respect of that legacy regardless of who might pay the tax.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

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The NRB is not an exemption so s38 IHTA is not in point. The entire estate is charged to tax at 0% and if applicable 40%. A specific gift does not bear its own tax unless the Will so directs. So all IHT falls on residue, Clause Y.

The wording of that clause is unusual in that a sub-clause like Y(a)(i) would usually include payment of legacies. But the clause seems nonetheless aimed at defining residue which is in law net of legacies, whether bearing their own tax if the Will directs or not.

Mr Kessler’s precedents define the residue conventionally, so after legacies, including one of the NRB amount (and the RNRB amount if relevant) on different trusts. Though called “Funds” (apart from the Downsizing Legacy) they are still legacies and this does not affect the calculation of the NRB amount or its priority over residue or, as in your case in clause X (c) its ranking after other legacies, or its having to abate if residue is insufficient to meet it in full. They are legacies for the conventional definition of residue which the precedents call “my Residuary Estate” and is residue for succession law though the precedents, like many others, do not use that particular term. One of those others also uses the term “gifts” not legacies (Practical Law’s Master Will)

Jack Harper

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I don’t think the legacy can fail although if residue is insufficient it might have to abate even to nil. Incidentally I favour the approach of PL’s Master Will which sets out clearly the incidence of IHT on both UK and non-UK property, though the direction might have yield to statute e.g. ss36-42 IHTA.

Jack Harper

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I agree with @paul that if A B C D E and F are non-exempt beneficiaries, and assuming (as the question says) that there is IHT payable, then the “Nil Rate Sum” is nil because there simply is NO “amount of cash I can give on the terms of this clause without incurring any liability to inheritance tax on my death”.

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Whilst I cannot locate a copy of the judgment, I am fairly certain this particular aspect was dealt with robustly by Patten LJ in the 2010 Appeal Court decision in RSPCA v. Sharp which, when applied in the present instance results in the complete failure of the NRB legacy.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

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Well if I am wrong so is Mr Kessler KC. See clause 1.1.1. I have quoted in full (I hope he will not mind) because the other sub-clauses though important in their own right do not detract from the clause identical to yours viz "

1.1 “The Untransferable Nil Rate Sum” means the maximum amount of cash which I can give on the terms of the General NRB Fund:

1.1.1 without incurring any liability to Inheritance Tax on my death;"

Full clause:

"1.1 “The Untransferable Nil Rate Sum” means the maximum amount of cash which I can give on the terms of the General NRB Fund:

1.1.1 without incurring any liability to Inheritance Tax on my death; and

1.1.2 without reducing the amount by which the Nil Rate Band applicable on the death of my Spouse would (apart from the gift of the Untransferable Nil Rate Sum made in my Will) be increased under section 8A Inheritance Tax Act 1984,

but subject to the following clauses.

1.1.3 For the purposes of computing the amount of the Untransferable Nil Rate Sum it shall be assumed that any claim which may increase the Untransferable Nil Rate Sum shall be made; and

1.1.4 For the purposes of computing the amount of the Untransferable Nil Rate Sum it shall be assumed that my Spouse will not remarry or enter into a civil partnership after my death.

1.1.5 My executors shall make a claim under section 8B Inheritance Tax Act 1984.

1.1.6 The Untransferable Nil Rate Sum shall be nil if: Inheritance Tax has been abolished at the time of my death; or I am not [married] at the time of my death; or The amount of the Untransferable Nil Rate Sum would otherwise be less than £5,000.

1.1.7 The gift of the Untransferable Nil Rate Sum has priority over the gift of the Residence NRB Fund. Any other legacy given by my will or any codicil has priority to the Untransferable Nil Rate Sum.

1.1.8 My executors may ascertain and fix the amount of the Untransferable Nil Rate Sum so as to bind all persons interested under this Will if the executors have discharged the duty of care set out in section 1(1) Trustee Act 2000."

Over to you Paul and Andrew and perhaps to Mr K himself!

Jack Harper

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In Sharp [2010] EWHC 268 (Ch) https://www.bailii.org/ew/cases/EWHC/Ch/2010/268.html the wording was “without IHT becoming payable in respect of this gift” rather than on my death.


  1. In my view this is to over complicate the will and is patently wrong. It seems to me to be clear that the Deceased had in mind 2 categories of people on whom he wished to confer his largesse. First there were his friends the Sharps and his brother (his sole surviving relative). Second he decided to make a large bequest to the RSPCA of the residue. He would be aware that any sum passing to the RSPCA would not be subject to IHT.

  2. It seems to me clear that the purpose of clause 3 was to bequeath a legacy of the amount that was the maximum amount without inheritance tax being payable. The draftsman intended by the description to cover the possibility that the nil rate band might increase between the date of the will and the death. In other words it was intended that this legacy would be free of tax and would be an amount equal to the nil rate band at the time of the death of the Deceased. The draftsman therefore anticipated increases by his wording."

And Over-Complicators (I name no names!) beware;


  1. I therefore do not accede to the RSPCA’s application and construe the will as contended for by the Defendants.

  2. It is a matter of regret in my view that this action was ever brought. It clearly caused great distress to the Defendants and I cannot believe the Deceased would have been happy to see arguments by the RSPCA designed to erode the largesse in favour of his friends and relative to their benefit in this way. It is true that IHT is payable according to the Defendants’ contentions (but not out of their share) when none is payable according to the RSPCA’a argument. However that fact cannot conceal that the whole purpose and thrust of the RSPCA’s argument is to raise its interest under the will by nearly 75%. I know it is said that Trustees of charitable organisations are required to maximise the return for their charity but I really wonder whether the discharge of that duty required this action to be brought. In my view the RSPCA whatever the view as to the will ought really to have considered that the residuary legacy that I have determined it is entitled to was generous and ample provision out of this estate. The impact of the arguments on the size of the bequest to the Deceased’s brother was quite stark. This action has plainly caused distress to the Defendants and in my view ought not to have been brought."

Jack Harper

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Jack, the High Court’s decision was reversed by the Court of Appeal.



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Oh Dear! I took the reference from a footnote in Mr Kessler’s book 14th Ed. I have now read [2010] EWCA Civ 1474. The case was complicated by the second gift which would of course absorb part of the NB. We are not told in the original query that there were other legacies only that there are PETS already exempt. Other legacies might reduce the amount of the NRB gift, even to nil, but not make it “fail”

The Court of Appeal held that:

  1. It is true that a gift equal to the nil rate band of IHT cannot be isolated from the application of the charge to tax. But that is not what the draftsman is saying. The words “in respect of this gift”, far from being inconsistent with an understanding of IHT, shows that the draftsman appreciated that the gift of the Property and the legacies under clause 3 would be aggregated in order to calculate what was left of the nil rate band. Clause 3 is therefore limited to what is left of the band before tax would otherwise become payable as a result of this gift. The phrase “in respect of” is far too general to negative the effect of the words which precede it."

In the query case, if there are no other legacies, the legacy is of £325,000 or whatever the amount it was when the deceased died unless and save to the extent that the estate is net of tax not as great. Here F is not exempt so residue bears all the tax if it is sufficient. If F were a charity the tax would have to be paid out of the legacy. But only £325,000 would be chargeable as the residue is exempt i.e. no tax. So the legacy would have to be grossed-up:ss38-42 IHTA and see IHTM26121-33.

Jack Harper

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Alright, let’s go back to basics.

Clauses like this came into existence in the era before the introduction of transferrable nil rate bands and are easiest to understand in that context. Let us suppose that you are a husband with children, at a time before there were residence nil rate bands and before nil rate bands were transferrable. You realise that if yours is the first death and you simply leave your whole estate to your wife your own nil-rate band will go unused, and she on her later death will be taxed on the entire joint assets with only one nil-rate band, her own, to set against them. So you decide to make a legacy of the nil-rate band either to the children or (more likely) to a discretionary trust, thereby ensuring that your nil-rate band is utilised on your death. Then the residue will pass to your wife. There would be no tax on your death since everything that was not nil-rated would be spouse exempt. And only the residue of your estate, plus the whole of your wife’s estate, would be taxed at her later death - therefore less overall than it would have been with the simple will.

There are a number of ways you could phrase such a legacy. For example it could be a legacy of:

  • “£140,000” (or whatever the nil-rate band happened to be at the time in question) or
  • “The upper limit of the nil per cent rate band in the schedule to the Inheritance Tax Act 1984”

Or similar. But the trouble with defining it in that way is that you would not know - at the time of drawing the will - what changes of circumstances there might be between the time of drawing the will and the time of your death, which could either:

  • give rise to first death tax; or
  • cause the legacy to be less than the optimal amount.

For example:

  • the nil-rate band might rise (or, in theory, might fall)
  • you might make a potentially exempt transfer
  • you might make a chargeable lifetime transfer
  • you might have already made a potentially exempt transfer but not know whether your death will occur within seven years of it
  • you might make a codicil containing a chargeable legacy
  • you might buy an asset that qualifies for business property relief or agricultural property relief
  • you might sell an asset that qualifies for business property relief or agricultural property relief; or
  • something else could happen that I haven’t thought to list above - perhaps something you could not possibly have thought of.

One way of drafting the legacy would be to make it along the lines of “the figure in the schedule to the IHTA as at the date of my death, minus PETs, minus CLTs, plus APR, plus BPR etc.” (if you see what I mean) and indeed many precedent books do use some variation on that structure.

However a really clever way of expressing it is something along the lines of “the maximum amount of cash I can give on the terms of this clause without incurring any liability to inheritance Tax on my death”. James Kessler’s book uses a variation on this - indeed I don’t remember seeing that formulation anywhere before the publication of his book, so it may be, for all I know, that he devised it.

Its advantages over other ways of drafting the clause are:

  • It’s quite brief.
  • It automatically - just by definition - resolves all the unknowns and produces an optimal result. Indeed it even works to adjust for contingencies you hadn’t thought of.
  • I’ve always thought it’s reasonably easy to understand - although the first-instance judgement in RSPCA -v- Sharp proved me wrong on that point.


A clause with that wording only makes sense in a context - such as that envisaged in the clause from James Kessler’s book copied-and-pasted above - where the residue of the estate passes to an exempt beneficiary. It was not designed for a situation where a legacy is made to one chargeable beneficiary and residue to another, and doesn’t really have any meaning in such a context. I believe that it comes out at “nil” as I have said above. If the testator making the will at the top of this thread had wanted to make a cash legacy to A, B, C, D and E of the amount mentioned in the schedule to the IHTA, that testator could have said so. In passing, I don’t understand why a testator would want to do that, at all: “I give to my nieces an amount which I haven’t chosen for myself but which I will let the Chancellor of the Exchequer of the day choose for me on the basis of political criteria which have nothing whatsoever to do with me, the size of my estate, or the needs or expectations of my nieces or my residuary beneficiary, and which will have no effect either way on the amount of tax my estate pays.” But to each their own, I suppose.

You’ll appreciate I feel a bit reluctant to post a “child’s guide…”-type post in an august forum like this one. I hope it’s helpful and I trust everyone will appreciate it is meant as an overview not as a detailed explanation.


I am not sure if we have achieved a general consensus that the NRB gift identified in Nicholas’s original post (13 July @ 04;45) fails.

I recognise that Jack identified that no IHT falls to be paid out of the NRB legacy as, under s.211 IHTA 1984, the taxis payable out of residue unless there is an abatement or direction in the will that a particular gift is to bear its own tax.

In both the wording of the will, and in James Kessler’s clause, as quoted by Jack, the gift is of “the maximum amount of cash which I can give (…) without incurring any liability to Inheritance Tax on my death”. Does this not indicate that if ANY IHT is payable on the death of the testator, regardless of whether residue might be given to exempt beneficiaries that an IHT liability arises in relation to that gift the maximum amount that might be gifted by the clause is nil?

By way of an alternative approach, if one adopts the view that as IHT is payable out of residue (s.211 IHTA) this does not affect the amount payable under the legacy, then how much is given by the legacy? If the estate is given wholly to non-exempt beneficiaries, inn the absence of placing any ceiling on the amount in question, as the IHT is payable out of residue then provided there is some residue, the Nil Rate Sum could be equal to the distributable value of the estate less, say, £1 being the notional residue remaining after payment of the IHT. On such an interpretation, I anticipate the gift would be void for uncertainty. Would a similar point be taken if residue was left to an exempt beneficiary, mindful that the courts might be expected to apply the same meaning to the words of the gift?

To proceed on the basis that in the context of the clause in question if any IHT is payable within the estate the Nil Rate Sum is reduced to nil provides a consistency which would not be achieved by any alternative interpretation.

As Andrew Jones has pointed out, there are many precedents out there by which the amount of a legacy is determined by reference to the nil rate band in the schedule to the IHTA, with a reduction for other chargeable legacies, failed PETs, etc. which might be used if the beneficiaries of a NRB legacy were to receive benefit regardless of whether any IHT was payable from the estate.

I remain of the view that the NRB legacy to which Nicholas refers fails as an IHT liability arose in the testator’s estate on their death.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

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Thank you all for your replies.

Here are some more details that might factor in.

Clause W precedes X which reads:

‘a)I GIVE the transferable Nil Rate Sum transferable to me from my late wife G (excluding any transferable Residential Nil Rate Sum) to H of [address].

b) “The Transferable Nil Rate Sum” means the transferrable single inheritance tax allowance unused by my wife G excluding any additional transferable residential nil rate sum’

There are no other legacies, therefore the residential nil rate sum falls in the residue.

If the full Testator NRB of £325 were given under Clause X divided equally between A, B, C, D, and E, the residue after IHT, debts and expenses would consist of roughly of £120K plus a property rental business with assets of £750K. No beneficiary is exempt.

A, B, and C are also the three Executors, i.e. beneficiaries under Clause X, and understandably keen on an interpretation that leaves them a one fifth share of the £325 of the Testator NRB.

One of them, A, is a retired solicitor who during the pandemic drafted a codicil that clarified Clauses X (the clause he hopes to be beneficiary under), and added other residuary beneficiaries to Y. There is a Testator email from the Codicil signing day that outlines the combined effect of it and the will. From this and conversations the Executor Beneficiaries, A, B and C assert that they know the Testator’s true intentions. However, a few months after the Testator had signed the codicil, and while still of sound mind and body, he ripped it up leaving only his unmodified will. This was six months before his physical health rapidly declined and he passed.

The Testator’s destruction of the codicil and the Executor Beneficiaries’ conflicted position appears to undermine any assertion they make as to knowing his intentions or evidencing them with the codicil summary email they have provided.

Nicholas Russell

Do you think the explicit exclusion of the residential NRB from the effect of Clause X, which unmentioned anywhere else falls in the residue of Clause Y, affect the interpretation of Clause X regarding where and how the IHT burden falls?

(In hindsight, I should have mentioned this at the outset. I was hoping things might be more clearcut.)

Nicholas Russell

“Under s.211 IHTA 1984, the taxis payable out of residue unless there is an abatement or direction in the will that a particular gift is to bear its own tax.”
@jack it has been put to me that in case of the failure construct, IHT being owed by the estate does not mean tax will be taken out of the NRB gift because the NRB is tax free. The occurrence of estate IHT is merely a condition that caused the gift to fail.
On the failure of Clause X gift, wouldn’t the testator NRB get moved to the residue and still be free of tax: so no tax deduction from the gift and therefore s.211 would not be an issue?

Nicholas Russell

I am convinced by Paul and Nicholas but it may not be the whole story.

1 The Sharp litigation is a red herring. Primarily because the residue was exempt. The ratio is in the C of A case at paras 29 and 30, the issue being ”simple to identify but….not easy to resolve”. The court favoured the RSPCA argument, that the pecuniary legacy of the NRB was an amount reduced by first allocating it to the value of the separate gift of a property, which acknowledged that the result could have been nil.

The burden of tax was not addressed but as one gift was free of tax and the other not, the former should have been grossed up.

It was common ground that s20 AJA 1982 did not apply, approved by the Court without further explanation, so it was assumed that “the contents of the will properly construed represent what the testator intended”

2 Now to Clauses W X and Y. The issue is one of construction per the established rules, just as in Sharp (paras 19-22). S.20 might be in point here but the testator’s actions and the divergent view of the legatees is not auspicious.

A perfectly tenable construction of X(b) is that the Sum is nil if any tax is payable. The remarkable outcome is that the testator’s apparent intention to benefit A-E significantly is totally defeated by the words used. This incensed Peter Smith J at first instance in Sharp as it might have done Lord Denning, the maverick boundary stretcher, in his day.

3 It is possible that the modern judicial mind will not stick to the literal interpretation even though it cannot completely re-draft a will (Sharp, para 25).

Sharp endorsed Lord Hoffmann in The Investors Compensation case, quoted in Mr Kessler’s book 14thEd at 4.2-3. ”Interpretation is the ascertainment of the meaning which the document would convey to a reasonable man having all the background knowledge which would reasonably have been available” which he said elsewhere meant “anything which a reasonable man would consider relevant”, as long as it was formally admissible.That would not include evidence of the testator’s subjective intention but see 5 below.

4 Patten LJ in Sharp made much of the fact that the will was drafted by a solicitor who must be assumed to be competent though able to make a mistake (para 22).

Clause W is revelatory and delusionary. The testator or his solicitor or both seemed to believe that the TNRB, and so possibly despite different wording the NRB also, was some species of intangible asset that could be bequeathed to a beneficiary or to two in unequal shares in Clause X. It is just a rate of tax applied to the entire chargeable estate. A rate of tax cannot be bequeathed.

5 It is hard to predict what a court might make of the actual words used given the literal outcome. Interpreting it as a pecuniary legacy of the NRB amount at the date of death entails the potential complications in Andrew Jones’ list. Specific treatment of those matters could surely not be read in. But it might fit the intention. Other ways of avoiding the outcome e.g. a gift of £325k would do too much violence to the actual words.

S.20 AJA may not help, even apart from the time limit, as the solicitor may have correctly understood the client’s intention but simply botched the drafting. S.21 might help if there were cogent evidence of intention provided the language is “meaningless” or “ambiguous” and there is no special time limit. But does a wholly unexpected outcome render the wording so? Unless the solicitor’s file as to intention is helpful “recollections may vary” but a court could prefer one of them. Clause W is meaningless in my view. Clause X is not but do its consequences render it “ambiguous”?

6 If the X gift fails, the tax payable falls on residue, just as it would if it vested. The W gift is nonsense unless it can be interpreted as a pecuniary legacy of the TRNB and even so the tax would fall on residue. If both fail F will have an undeserved windfall to meet it.

Jack Harper

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I have rather assumed that a variation would be out of the question but F might be persuaded that it was better than litigation by the other beneficiaries. It won’t change the IHT payable so it would not matter that it was too late for s142. The solicitor who drafted the will might act for free to avoid a Larke v Nugus letter plus a negligence action

Jack Harper

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I’ve advised on a virtually identical will and advised as per Paul’s view that there can be no legacy if IHT is payable. It is impossible to go beyond this and ascertain what the testator actually intended (at least from the will) because it does not make any sense in context and clearly the draftsman/adviser did not understand their own template.

I suspect the will file will will rarely add very much that makes sense of the testator’s intention as it will likely have been included on the basis of erroneous advice.

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Obviously the strategy is up to the person who has the task of considering the will and the precise role they have been asked to play and by whom.

It is apparent that the testator was either badly advised or badly served by the drafter. I would have thought that obtaining the maximum information from the drafter would be essential even if it drew a blank. As it has not been mentioned it seems that no explanatory letter was received but if one is not to hand it should at least be established that none was written. Although a lay client may often have just as much difficulty understanding the letter as the will itself such a letter to me is not only best but mandatory practice. I wrote many and I have seen many written by others and its absence would be a black mark for the drafter. It would be impossible for a properly constructed letter to fail to express the expected outcome of these strange clauses.

If not already then at some stage after becoming on notice the drafter is going to have to write to insurers. They will instruct a firm to advise them on liability and recommend action. While all that will be undisclosed and in any event privileged the burden will soon be apparent from the way matters progress. While further litigation may be prohibitively expensive, surely getting to this stage would be a worthwhile investment by the disappointed beneficiaries.

Jack Harper

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