If the surviving spouse died in a later year when the nil-rate band had reached £350,000, the first £560,000 (160% of £350,000) of the estate would be tax exempt.
In a judgement following an unsuccessful appeal to a 2006 decision by the European Court of Human Rights,[2] it was held that the above does not apply to siblings living together.
[3] Prior to this legislative change, the most common means of ensuring that the Nil-Rate Band of a pre-deceasing spouse was utilised was to include a legacy in the predeceasing spouse's will of any unused portion of their Nil Rate Band at death to the trustees of a discretionary trust, with the remaining part of the estate being left either to the surviving spouse absolutely (i.e. not subject to any restrictions) or on trusts which entitled them to benefit from the income of the trust during his or her lifetime.
The potential beneficiaries of the discretionary trust would typically be the spouse and children and remoter descendants of the couple.
Since the Government seeks not to profit from the death of those who gave their lives in military service or died from the results of a wound, injury, or disease associated with that military service, then the estates of such servicemen and women are exempt, totally, from any Inheritance Tax regardless of the value of the estate even if it amounts to millions of pounds.
That they do qualify may be certified by application to the British MOD "Joint Casualty and Compassionate Centre" (JCCC).
In the summer budget of 2015 a new measure was outlined to reduce the burden of IHT for some estates by providing additional tax-free allowances in cases where the family home passed to direct descendants.