Excepted Estates and Small Estates

The amount inherited by a spouse or civil partner is usually exempt from Inheritance Tax.

The situation is more complicated if the surviving spouse or civil partner is not domiciled in the UK. We will explain below the meaning of some commonly used phrases relating to Inheritance Tax, excepted estates and small estates.

Excepted Estates

Many estates are classed as excepted estates. These are estates which do not have any Inheritance Tax to pay. So they can take a reduced disclosure route to probate. There are special rules for handling an ‘excepted estate’. An estate will usually be referred to as an excepted estate where:

• The total value of the estate does not exceed the Nil Rate Band of IHT, currently £325,000. Any Potentially Exempt Transfers made by the deceased must also be taken into account.
• An estate where the first spouse / civil partner has already died: the estate is valued at less than £650,000.
• The gross value of the estate does not exceed £1,000,000 and there is no tax to pay because either all assets were left to the deceased’s spouse or civil partner living in the UK or to a ‘qualifying’ charity.
• The deceased was domiciled outside the UK at the date of their death and had never been domiciled (or deemed domiciled for IHT purposes) in the UK during their lifetime and the gross value of their UK estate does not exceed £150,000.

The rules about excepted estates are concerned with gross values so in most cases the treatment of liabilities does not have any impact. If the estate is not an excepted estate a full Inheritance Tax account must be completed.

Small estates

If the deceased’s estate is worth less than £5,000 or the deceased owned everything jointly with their spouse or civil partner, probate is not usually needed.

Probate is the process of administering an estate of someone who has died in order to resolve all claims and distribute the assets of the deceased as per their final wishes.

This is called a ‘small estate’. Probate is almost always required when:

• the deceased’s estate includes property
• ... or land
• held in their own name
• ... or jointly under a tenancy in common arrangement.