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Nationality
23/03/2009
Each jurisdiction has a different means of connecting persons to their specific legal system. Nationality is one connecting factor and means allegiance to a sovereign state, coupled with the right to look to that state for protection whilst in a foreign state. It may be acquired by birth or naturalisation. Spain, Portugal, Germany, Austria, the Netherlands and Italy use nationality as their connecting factor.
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Nil Rate Band
24/03/2009
The NRB is a key part of IHT. There are three key rates of tax for IHT:
- 0%
- 20% and
- 40%
The value of the 0% band is known as the NIL RATE BAND (NRB) for the obvious reason that the rate of tax on that band of value is 0%. It is important to note that it is not an exemption but a 0% rate of tax. This is of significance when making chargeable transfers which are for less than the NRB where the fact that it is a chargeable transfer for IHT (even though there will be no IHT payable) matters for eligibility for s.260 TCGA 1992 hold-over relief.
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NRB Discretionary Trust
27/04/2009
For many years a popular way of making use of an individual’s NRB and achieve a saving of IHT across the estates of two spouses and more recently two civil partners was to make a settled legacy of the NRB to a discretionary trust. A discretionary trust was used to afford the surviving spouse or civil partner the opportunity to benefit from the value of the trust fund as a beneficiary of it whilst at the same time not to have the deceased’s legacy combined with the estate of any of the beneficiaries on their respective deaths but to be kept separate and be taxed separately under the relevant property regime. This became the prime way in which a married couple protected their matrimonial home from IHT.
