Transferable Nil Rate Band Pitfalls

The advent of the Transferable Nil Rate Band ("TNRB") in October 2007 was hailed by many as a breakthrough for the common man and the end of the probate solicitor.  However, since then there has been a worrying increase in the number of un-administered estates and a linked increase in the number of enquiries in relation to contentious probates.

Availability of Transferable Nil Rate Band

Many lay executors presume that the TNRB applies to "common law" spouses, but this is not the case.  The TNRB is only available for married or civil-partnered couples.  It is also not automatically applied to the second estate and needs to be claimed by the executors within 24 months of the second death. 

Action on First Death

There is a common misconception that the executors of the first to die do not need to do anything on the first death as everything passes automatically to the surviving spouse.  This is not necessarily the case, especially if the couple had tax efficient Nil Rate Band ("NRB") trust wills in place.  Where a will contains a NRB trust, the trust will need to be brought to an end and the assets appointed out of the trust to the survivor.  Even where the will is drafted so that the trust does not arise automatically it is common for the ownership of assets to have been split, including the ownership of the family home.  If this is the case then the executors will need to get a grant of probate in order to assent the property to the survivor.

Evidence required to support claim - Information is King!

When dealing with the second estate the executors will need to know the value of the first estate and will need to provide various documentation relating to the first estate to HMRC, in order for the claim for the TNRB to be accepted.  They will also need to know about any gifts that may have been made less than 7 years before the first death as this will affect the amount of NRB available to be transferred.  The longer the length of time between the death and the information being collated, the more difficult it will be to ensure the information is accurate.

In failing to properly administer the first estate the executors are opening themselves up to claims of breach of trust as well as storing up problems for the executors of the second estate (most commonly the same people). They could also be missing out on tax of care home fees planning. It is essential to get timely advice in relation to all estate matters to ensure that the estate is administered in the best possible way in the specific circumstance of the case and to avoid any expensive claims from disgruntled beneficiaries.

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