What I say is "Phew, I am so grateful for the fact that nil rate bands can now be accumulated between spouses.  WHAT A RELIEF.  As long as my husband and I leave everything to each other in our Wills, we get £650k between us before we have to pay inheritance tax, which should hopefully give some breathing room."

 
What I think is "SIX HUNDRED AND FIFTY GRAND?!  Pah.  Even with all that life insurance we've indulged in while we're young and healthy to make sure we'd leave a merry widow(er), I'd be breathing easy in the financial wiggle room afforded by half of that figure, ta very much."  The fact is, we live in the cheap-housing-district of the North of England, we're relatively young, didn't buy our first house until the prices had started climbing and we left university in the noughties.  Although I can't claim to be destitute, frankly, I pity the poor probate solicitor who has to wade through the paperwork relating to my student loans if I happen to pop my clogs before they're paid off (some time in 2070, or whenever it may be).   Let's just say that the inheritance tax benefits of being married are somewhat irrelevant to us right now.

However, give us a few years, a house price rise or two - or a house move - and a bit more opportunity to gnaw at that mortgage of ours, and maybe we'll be as grateful as our parents are for the fact that in October 2007, the law changed to allow the transfer of inheritance tax nil rate bands between spouses and civil partners. 

Everyone's estate - what they leave behind when they die - is exempt from inheritance tax up to a certain point.  Currently, that point is £325,000; hence, the first £325,000 of anyone's estate is called the "nil rate band".  In the past, nil rate bands were often wasted.  There is no inheritance tax on gifts to spouses or civil partners, so if the first spouse or civil partner passed away and left everything to the other, they'd missed a chance to use their nil rate band.  Effective tax planning back then concentrated on "nil rate band trust wills", which would make gifts of assets up to the value of the nil rate band, leaving everything else to the surviving spouse or civil partner.  This would ensure no wastage of the tax-free sum available, but the resulting wills were often complicated and unwieldy, and the estates they created could take extra time and expense to administer depending on how much the financial circumstances of the deceased had changed between making the will and their death.

The post-October 2007 situation is far simpler.  On the death of the second spouse or civil partner, as well as their own nil rate band, their estate can make use of whatever percentage of the first spouse/civil partner's nil rate band was unused on their death.  (The fact that it is a percentage is crucial; it means that even if the first spouse or civil partner died many years ago, the applicable nil rate band is the one in force at the death of the surviving spouse or civil partner, up to the percentage that was unused on the first death).  If the first spouse or civil partner to die left everything to the survivor, then the applicable percentage is likely to be 100% - barring any lifetime transfers made to others before the first death.  Any lifetime transfers -  or gifts by will to someone other than the surviving spouse or civil partner - reduce the percentage of nil rate band available.

 
I've tried to make all that as clear for everyone else as it is in my head, but I don't think I've succeeded.  It doesn't look as neat and clear as I'd imagined - try the hmrc.gov.uk website if you're especially confused.  But it's probably best to sum it up thus: as long as you leave everything to each other and you're married or in a civil partnership, you can pretty much take it as read that you've got at least £650,000 to play with before either of your estates would have to pay inheritance tax.   (There are exceptions, but you can talk to your solicitor about those). 

 
And even if you don't need all of that (yet), you can always pretend you might…even if you’ve never been married to Richard Burton.