Nil rate band discretionary trusts

Produced by Tolley in association with Emma Haley at Boodle Hatfield LLP
Trusts and Inheritance Tax
Guidance

Nil rate band discretionary trusts

Produced by Tolley in association with Emma Haley at Boodle Hatfield LLP
Trusts and Inheritance Tax
Guidance
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Before October 2007, it was standard practice for married couples with estates large enough for inheritance tax to be an issue to include nil rate band discretionary trusts (NRBDTs) in their Wills. Otherwise, it was difficult for both spouses (which term is used here to include civil partners) to use up their nil rate bands (NRBs). This was because:

  1. if the first spouse died leaving the whole of his or her estate to the other, there was no inheritance tax to pay because of the spouse exemption

  2. however, the first spouse to die had ‘wasted’ his NRB, because the combined estate would be taxable on the second death, but with the benefit of only one NRB (ie that of the second spouse to die)

The NRBDT was a useful device which enabled the first spouse to die to use his nil rate band yet still provide for the survivor to benefit from the assets via a discretionary trust.

The arrangement works as follows:

  1. the

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Emma Haley
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Associate at Boodle Hatfield LLP 


Emma Haley is a senior associate solicitor at leading private client firm, Boodle Hatfield LLP, renowned for providing first-class and practical legal advice to wealthy clients around the world.Emma has many years experience in dealing with all aspects of wills, probate, capital taxation and succession planning as well as UK and offshore trusts. Emma currently heads up a technical know-how team and is a regular writer and lecturer on estate planning and inheritance tax and also a member of the Society of Trust and Estate Practitioners.

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  • 20 Jan 2025 11:11

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