I have been a widow for more than 20 years. My husband left his whole estate to me and I plan to leave everything to our son. I’m worth about £850,000. I understand that these days you can inherit the Inheritance Tax allowance from your partner if they left everything to you, but does that apply if he died before that rule was introduced?

Wymondham & Attleborough Mercury: Douglas Bridges is an Independent Financial Adviser with Smith & PinchingDouglas Bridges is an Independent Financial Adviser with Smith & Pinching (Image: Smith & Pinching)

Douglas Bridges of Smith & Pinching responds:

The good news is that yes, you can indeed be the recipient of your late husband’s unused Nil Rate Band (NRB), which is the amount you can leave to your heirs that gets a zero rate for Inheritance Tax (IHT). Anything he left to you as his spouse/civil partner is exempt from IHT, so if he left everything to you, you can claim his full NRB of £325,000, which is then added to yours giving you a combined NRB of £650,000.

Even better news is that you are also entitled to an additional slice of Nil Rate Band if you leave your home to direct descendants (children, grandchildren, adopted/fostered/stepchildren), which can be up to £175,000, depending on the value of your home. This is known as the Residence Nil Rate Band (RNRB) and, importantly, this too can be passed to a surviving spouse/civil partner if unused, even if your husband died before it was introduced. In practice, this means that you could be entitled to a combined NRB/RNRB of up to £1 million.

However, it is entirely possible that your estate could grow beyond the £1 million figure before you die, if you have savings and investments that perform well and if house prices continue to rise, increasing the value of your home. I think it might be worth discussing your finances with an Independent Financial Adviser to understand what your potential future IHT liability might be. We use lifetime cashflow planning to project values forward over the coming years using different scenarios, so that you can understand at what point IHT may be a potential problem. If it transpires that your estate is likely to have a future IHT liability, there are ways of managing that, including lifetime giving.

Any opinions expressed in this article do not constitute advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. The above taxation information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

For more information, please visit www.smith-pinching.co.uk