Q: My father died four years ago. As he left everything to my mother there was no Inheritance Tax liability. My mother died last year and I am ready to apply for probate. Is it correct that my father's unused IHT threshold can be transferred to increase my mother's IHT threshold? If so, is there a limit to the timespan between the two deaths that could affect such a transfer?
A: Married couples and registered civil partners are allowed to pass assets to each other during their lifetime or when they die, without having to pay Inheritance Tax (IHT). This is known as spouse or civil partner exemption.
There is no limit to how much can be passed on in this way, provided the person receiving the assets is a permanent UK resident. On death, the first spouse's unused threshold can then be transferred to increase the IHT threshold of the second spouse or partner when they die, taking the total threshold to £650,000. This applies even if the second spouse has remarried and irrespective of time span between the two deaths (if they were after 1975).
To transfer the unused threshold you as representatives of the second deceased, or the executors of their will, must within two years of the date of the death of the second spouse claim the unused Nil Rate Band in a prescribed form from HMRC.
There are many rules concerning claiming the unused Nil Rate Band of the first person's estate, which need to be correctly followed to enable it to be claimed. I would suggest that you seek help from a solicitor as this can be quite a complex issue.