A woman who inherited under her father’s 2006 will is seeking clarity on whether she mishandled the estate’s administration, amid changes in inheritance tax rules introduced a year later. The issue centers on a nil-rate band trust included in the will, which was not registered or funded after her father’s death in 2023, raising questions about compliance with the will’s terms and potential tax implications.

Prior to 2007, it was common for wills to establish nil-rate band trusts to ensure married couples could fully utilise their inheritance tax allowances. The UK government’s introduction of transferable nil-rate bands in 2007 allowed spouses to transfer unused allowances to the surviving partner, reducing the need for such trusts. However, legal experts note that trusts established before the change may still be valid and enforceable.

Emma Becher, an associate in private client and tax law at Withers, explained that the determining factor is whether the will explicitly required the establishment and funding of the trust upon death. If so, the trust might have come into effect automatically, even if no formal action was taken to register or administer it. She highlighted that the existence of a trust cannot be overlooked solely because the law changed and the trust may no longer be essential from a tax perspective.

The concern arises if assets intended for the trust were transferred directly to the surviving spouse, which may constitute a departure from the will’s instructions. While transfers to spouses are generally exempt from inheritance tax, this exemption does not circumvent the need to properly execute the will or maintain trusts established by it.

Resolving such issues depends on the specific wording of the will, the nature of the estate’s assets, and any steps already taken during estate administration. With the estate administered in 2023 and the deadline for certain corrective measures, such as deeds of variation, now passed, immediate professional advice is recommended to determine potential remedies, tax consequences, and trustee duties.

Becher emphasised that the transferable nil-rate band legislation did not automatically invalidate existing trusts created before its implementation. She advised a thorough review by a qualified solicitor to assess whether errors occurred and to devise appropriate next steps.

This situation underscores the complexity of estate administration following significant tax law changes and the importance of professional guidance in interpreting and executing wills.