I just wanted to check one point re excepted estates/exempt estate…
To qualify as an excepted estate one of the conditions you mention is – the gross estate value has to be less than £3 million, the net chargeable value of the estate after spouse exemption is below the inheritance tax threshold and the entire estate passes to the surviving spouse.
This implies for the estate to qualify as exempt all the estate must go to the spouse -is this correct ?
Or is it per the HMRC IHT 400 notes on page 3 (for deaths on or after 1 January 2022) which mention …
“the gross value of the estate does not exceed £3 million and the net chargeable value of the estate after deduction of liabilities and Spouse or Civil Partner Exemption and/or Charity Exemption only does not exceed the Inheritance Tax threshold”
This indicates as long as after the spouse exemption the estate is below the IHT exempt exemption then not all the estate needs to be passed to the spouse some could go to another beneficiary and qualify as an exempt estate – is this correct?
Thank you for your help.
Thanks for a great question/comment.
Another way of looking at the point is to see it as a situation where an Inheritance Tax account (IHT400) is NOT required when applying for Probate. The rules around this changed in 2021 – most notably perhaps raising the excepted estates upper limit from £1m to £3m.
The requirement is (and was) that the estate falls below the upper limit, and (after the application of Spouse or Charitable exemptions) the net chargeable estate falls below the nil rate band (ie no IHT is payable). However, in isolation this does not in itself mean there is no requirement to submit an IHT 400 return when applying for probate. Other factors in the estate may make this necessary – eg lifetime gifts, or trust assets.
A really interesting question – for which a big thank you!
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