4 - Inheritance Tax (Self-Test Questions) Flashcards
Self-test questions from study text
Where is the inheritance tax (IHT) legislation found?
The Inheritance Tax Act (IHTA) 1984.
How many rates of IHT are there?
- 40%;
- 36%
- 20% and 25% (trusts); and
- 0%.
Are non-UK-domiciled individuals subject to IHT?
Yes, if they have UK assets.
Is a UK-domiciled individual liable to IHT on property situated in Spain?
Yes
What is a transfer of value?
Any disposition whereby the value of the estate immediately afterwards is less than it would have been if it had not been made.
Are all gifts to a spouse or civil partner IHT exempt?
Yes if UK but there is a maximum exemption of £325,000 if the recipient is domiciled outside the UK.
What is the current annual exemption?
£3,000.
What is the exemption limit for a wedding gift from a groom to a bride?
£2,500.
Can a gift of property to a trust ever be a potentially exempt transfer (PET)?
Yes, but only if the gift is to a disabled trust. A gift into a bare trust is also a PET, but a bare trust is not a true trust and beneficiaries are taxed as if they owned the assets absolutely.
Give an example of a CLT.
A gift to a discretionary trust or any other type of relevant property trust.
What type of IHT transfer is the creation today of an interest in possession trust?
A chargeable lifetime transfer (CLT).
Does a gift with reservation count as a gift when it is made?
Yes.
On what three occasions could inheritance tax (IHT) be charged on a discretionary trust?
- On establishment of the trust: this is a chargeable lifetime transfer (CLT).
- There is a periodic charge every ten years.
- There is an exit charge on distribution of the trust fund (or part of the trust fund) to
beneficiaries.
Are accumulation and maintenance (A&M) trusts, set up during the settlor’s lifetime and after 5 April 2008, subject to exit charges?
Yes.
