IHTM12222 - Succession: Scottish Prior and Legal rights: Legal rights: Inheritance Tax practice on death
Death of first spouse or civil partner
You should allow full spouse or civil partner exemption (IHTM11031) (IHTM11032) in respect of the property actually taken by the surviving spouse or civil partner by way of legal rights. (IHTM12221) But you should make sure that the surviving spouse or civil partner has in fact received all the assets for which exemption is deducted.
Form IHT400 includes a question at the top of page 3, to be answered where the deceased person was domiciled in Scotland, about the claim or discharge (IHTM12229) of legal rights. In many cases a final decision on whether to claim or discharge legal rights will not have been taken at this early stage.
Often the testamentary benefits of a surviving spouse or civil partner cannot be satisfied without impinging on the legitim (IHTM12221) fund. In cases where the surviving spouse or civil partner, in fact, takes the whole or part of the legitim fund, this can only be by reason of a transfer by those entitled to the legitim fund and not by reason of a transfer of value by the deceased spouse or civil partner. Nevertheless, in such cases, you should allow full exemption on what the surviving spouse or civil partner actually takes.
You should bear in mind the provisions of IHTA84/S147 (IHTM35211) where persons under 18 are entitled to claim legitim and the testamentary provisions in favour of the spouse or civil partner, if taken up, would leave insufficient estate to meet legitim claims.
Where the value of the legal rights, if claimed, would give rise to a worthwhile amount of tax, or additional tax at your death file, you should ask the executors to tell us what the potential claimants intend to do with their legal rights. When doing this you should tell the executors what the tax implications would be if:
- the legal rights are claimed, and
- the potential claimants decide to postpone making a decision.
Where decisions are to be postponed, make sure the executors and claimants are aware that interest (IHTM30341) will be charged from the original due date (IHTM30151).
Where the potential claimants are keeping their options open, but the executors apply for a clearance certificate (form IHT30) (IHTM40010) you should either:
- Where the potential claim will not affect the tax payable - issue the certificate and close the case. This will mean that no later adjustment can be made to the tax if and when legal rights are claimed, or
- Where the potential claim could result in additional tax being paid - write to the executors and say that until the decision(s) on the legal rights claims are known, we cannot determine the final tax liability so clearance cannot be issued.
Instruments of Variation
Provided the conditions (IHTM35012) of IHTA84/S142 (1) and IHTA84/S142 (2) are satisfied you should treat a document which redirects a person’s legal rights in the same way as any other instrument of variation.