Death Estate and valuation

Question 1

Does death estate include anything acquired by reason of death (such as proceeds of life assurance policy)

Answer 1

Yes

Question 2

Who pays tax on the death estate

Answer 2

Personal representative

Question 3

Assets that pass to … are exempt from IHT

Answer 3

Spouse/Civil partner (outright or to trust in which they have interest in possession)
Charity
Qualifying political party

Question 4

Deduct / don’t deduct from death estate
Debts incurred for full consideration

Answer 4

Deduct
Not gambling debts

Question 5

Deduct / don’t deduct from death estate
Taxes imposed by law

Answer 5

Deduct
income and capital gains

Question 6

Deduct / don’t deduct from death estate
Reasonable funeral expenses (inc tombstone)

Answer 6

Deduct

Question 7

Deduct / don’t deduct from death estate
Unpaid debts if remain unpaid for commercial reason and not to obtain tax advantage

Answer 7

Deduct

Question 8

Deduct / don’t deduct from death estate
Loans obtained to acquire or enhance excluded property (situated outside UK and individual entitled is UK Dom)

Answer 8

Don’t deduct

Question 9

Where debt is charged on specific property the debt is

Answer 9

Deductible primarily from the property on which it is charged

Question 10

QSR formula

Answer 10

Tax paid on first * relevant % * net transfer/Gross transfer

Question 11

When does fall in value relief apply

Answer 11

Where property transferred within 7 years of death either
- if owned, the open market value on death is less than time of property
- If sold (to unconnected) by the transferee before death and sale proceeds were less than value at time of transfer

Question 12

Fall in value relief does not apply to

Answer 12

Plant and machinery
Chattels with UL < 50 years

Question 13

Estate entitled to RNRB if:

Answer 13

Dies on or after 6 April 2017
Own a home or share of one so that it is included on death estate
Home is inherited by direct descendant (children / grandchildren)

Question 14

RNRB amount

Answer 14

£175,000

Question 15

Value of a home for death estate

Answer 15

Open market value of the property less any liabilities secured on it (e.g. mortgage)

Question 16

If death estate valued at more than £2m

Answer 16

RNRB is tapered away by £1 for every £2 the estate is worth more than £2m threshold therefore > £2.35m no RNRB

Question 17

Tapering of RNRB is calculated on

Answer 17

Value of all assets less debts and liabilities
BUT BEFORE deducting exemptions such as spouse / charity exemptions / reliefs

Question 18

NRB transfer

Answer 18

Between spouse
if spouse dies with used NRB, the unused proportion is transferred to the surviving spouse

Question 19

Claiming the transfer of NRB

Answer 19

When surviving partner dies, personal representatives must make claim by later of
- 2years from end of month of death of survivor or
- three months from the date the personal representatives first act for the survive
HMRC can accept a late claim

Question 20

Transfer of unused RNRB when

Answer 20

Surviving spouse dies after 5 April 2017
if die before, deemed RNRB 100k

Question 21

IHT charge if 10% or more left to charity

Answer 21

36%

Question 22

Net chargeable estate

Answer 22

Value of the estate after deducting all available reliefs, exemptions and remaining NRB but before deducting charity and RNRB.

Question 23

When does reduced rate of IHT not apply

Answer 23

If personal representatives elect for it not to apply (benefit minimal, don’t want to incur cost of valuing items)

Question 24

Value of a transfer of value is

Answer 24

the diminution in value of the transferor’s estate

Question 25

Assets transferred are usually valued at

Answer 25

open market value

Question 26

For lifetime transfers when part of an asset is given away to calculate value consider

Answer 26

Position before and after transfer

Question 27

For IHT, quoted shares are valued at

Answer 27

Lower of 1/4 up and average marked bargain

Question 28

Unit trust units are valued at

Answer 28

bid price (lower of the two prices - offer price and bid price)

Question 29

Proceeds of a life assurance policy owned by a person on his own life are

Answer 29

included in death estate if not in trust

Question 30

If individual dies owning life assurance policy on the life of someone else the amount included in estate for IHT is

Answer 30

The market value of the policy

Question 31

overseas assets in the death estate are valued at

Answer 31

the sterling equivalent using the exchange rate giving the lowest sterling valuation
Less 5% for additional administration

Question 32

Related property is defined as

Answer 32

Property related to property in the transferor’s estate which is
comprised in the estate of their spouse
held by a charity / political party
as a result of a transfer made by the transfer or their spouse

Question 33

Valuing related property - two valuations

Answer 33

Higher property
Value of transferors interest as if no related property
proportion held by transfer of the value of the whole of the transferors interest plus related property

Question 34

Proportion for related property not shares

Answer 34

Transfer at unrelated value / (value transferred + value related) * value of total related property owned
For shares calculate by number of shares