Inheritance Tax | Can Siblings Benefit from Allowances Designed for Spouses?
In recent months, siblings and UK Inheritance Tax have been in the spotlight somewhat with MP's tweeting about it and a well reported case involving the Utley sisters bringing it to light. Conservative MP, Sir Edward Leigh has shown his support to a draft bill that was put forward by Lord Lexden which opened up the opportunity for siblings to become civil partners.
In 2015 Lord Lexden put a draft bill forward to implement this. If approved, this would affect the situation where when one of them dies and allow access to allowances reserved for spouses and civil partners. Where siblings own a property together this would mean the survivor is not forced to sell their family home in order to cover Inheritance Tax. The bill was rejected and the new suggested provisions were not implemented.
The draft bill received a second reading in the House of Lords last July and comments suggest that it won’t receive government support.
The Utley sisters, who jointly own their property, have campaigned tirelessly for alternative families such as theirs to be recognised by law so that they afforded the same benefits as others and would and be exempt from Inheritance Tax when the first of them dies and the other inherits the property.
So, what is the current law on Inheritance Tax?
As it currently stands, the law states that civil partners and couples can make a claim for relief from Inheritance Tax on any gifts made between them. These gifts can either be made during their lifetime or upon the first death.
Siblings do not get this same relief so, if the estate of either party is in excess of the nil rate band allowance (which currently stands at £325,000) there could be a liability to Inheritance Tax at a rate of 40%. This means that this has now become a real concern for families who find themselves in a similar position to the Utley sisters.
So, what can be done to reduce the liability of Inheritance Tax?
Should the draft bill remain unsuccessful, there is still a question regarding the situation that siblings find themselves in, what they can actually do to reduce Inheritance Tax and what they will ultimately have to pay. In some instances, it is possible to review your Will in order to help reduce the liability or structure your estate planning or assets in a way that any liability can be covered. It is especially important for siblings to do this in the same way it is for unmarried couples.
If you need to review your estate planning to avoid, reduce or plan for, an Inheritance Tax Liability then you should seek professional hep and guidance.