IHTM04343 - Estate Duty surviving spouse exemption: application on death
Broadly, the exemption applies if Estate Duty was paid or was deemed to have been paid (IHTM04452) on the death of the first of the spouses to die. Then, provided that all the necessary conditions are met (for example, that the property continued to be settled property (IHTM04456) and that the surviving spouse was not competant to dispose (IHTM04457) of it), the trust property is left out of account (IHTM04331) on the death of the surviving spouse or on the termination of their interest in possession in it, IHTA84/SCH6/PARA2.
The exemption cannot apply if the death of the first spouse occurred on or after 13 November 1974 as the Estate Duty spouse exemption was unlimited from this date.
The exemption may be restricted if duty was not paid (IHTM04453) on certain types of asset.
Example
Ronald died in 1973 and by his Will left his estate to his wife Joan for her life, with the remainder to their children.
On the assumption that Joan has no power to use the capital of the trust fund (IHTM04457) as she thinks fit, it will normally be left out of account in determining the estate chargeable to Inheritance Tax on her death.