Interpretation of the IHT can sometimes become confusing with atypical situations. It is important to note that such situations or circumstances have a probability of occurring. The law of ‘commorientes’, requires a deeper understanding of how IHT applies to an Estate where both spouses expire, and it is difficult to establish the order of death. In other words, this refers to a situation where it is not possible to understand who died first.

The law of commorientes deems that the younger in age of the two spouses is regarded to have departed after the elder among the two. Accordingly, IHT rules are interpreted where estates transfer into each other before passing on to survivors.

Atypical situation – demise of both partners

Typically estate and chattels etc are bequeathed to children or spouse by a will. Interpreting the manner in which IHT applies will be straightforward in these instances with the regular rate slabs. The other situation is when spouses bequeath their possessions to each other and on their demise will it to move on to their children. Here again, the applicable laws are pretty straightforward to interpret. However, when both the spouses expire at the same time, and where the estate will first transfer to the other spouse before passing on the heirs, it requires interpretation as per the aforesaid rule. Here is a scenario to help understand it better.

• A husband, aged 60 and his wife, aged 57 have estate worth £ 5,00,000 each and will the same to pass on to their spouses, after which the estate will be inherited by their children, or may pass on directly in the event of the beneficiary spouse pre-deceasing the one bequeathing the estate.
• In the event that both the spouses perish together, the elder of the two will have deemed to have expired first. This means that in this case, the husband is deemed to have expired first leaving his estate to the wife.
• The transfer of the estate from the husband to the wife attracts the benefits of spouse IHT exemption and the £ 5,00,000 worth estate that moves from the deceased husband to the deceased wife will not attract IHT.
• The property bequeathed by the husband to the wife, will naturally pass on to the surviving children, and this will also not attract any IHT.
• The wife’s property of £ 5,00,000 will transfer directly to the children, because the husband is deemed to have expired before the wife. This part of the transfer will attract IHT.

Exceptions and additional considerations

There would be exceptions and additional considerations to the above scenario. In the case of intestacy, the relevant laws relating to intestacy will apply. And additional considerations include the Nil Rate Band that will apply for a particular value of the estate. Another interesting aspect is the fact that unused nil rate band will apply in this case. For instance, the husband’s property passes on to the wife without attracting IHT as per spouse exemption clause. Therefore, the nil rate band of the husband’s bequeathal which is unused can be used while calculating the wife’s nil rate band as a sum of the two. This will give considerable relief from IHT, depending on the value of the estate that passes on from spouse to spouse and finally to the surviving children.

Overriding factors

Notwithstanding the provisions of the IHT regarding simultaneous death of spouses, clauses will differ when there is evidence to prove the death of one spouse before the other. Wherever there is conclusive proof that one of the spouses pre-deceased the other, even by a very short period, the laws on simultaneous death will not apply. Under such circumstances, the laws relating to individual death will apply to the inheritance. This means that the passing on of the estate will attract IHT for each of the individuals, with necessary benefits of nil rate bands.

Transferable nil rate band

The transferable nil rate bands has come at the right time, and in combination with the law of commorientes, it offers families reduced exposure to IHT in the event of simultaneous death. To fully benefit from both the laws, it would be a prudent option to use the services of qualified and experienced accountants. Understanding the full implications of the law and using it to maximum advantage requires knowledge and experience on splitting up the estate. The services of experienced accountants will help in exercising options as per legal provisions, and help beneficiaries to fully enjoy the benefits of the estate without having to pay more tax.