IHT (Death Estate)

Question 1

What are the 8 steps to calculate the IHT on the Death Estate?

Answer 1

(1) Calculate CUMULATIVE TOTAL
(2) Identify TAXABLE ESTATE
(3) Value TAXABLE ESTATE
(4) Deduct DEBTS & EXPENSES
(5) Apply EXEMPTIONS & RELIEFS
(6) Apply RNRB
(7) Apply NRB
(8) Apply IHT DEATH RATE (40%)

Question 2

What are the 8 steps to calculate the IHT on the Death Estate?

Answer 2

(1) Calculate CUMULATIVE TOTAL
(2) Identify TAXABLE ESTATE
(3) Value TAXABLE ESTATE
(4) Deduct DEBTS & EXPENSES
(5) Apply EXEMPTIONS & RELIEFS
(6) Apply RNRB
(7) Apply NRB
(8) Apply IHT DEATH RATE (40%)

Question 3

Step (1) Calculate CUMULATIVE TOTAL.

What is the ‘Cumulative Total’?

Answer 3

Total CHARGEABLE VALUE of all CHARGEABLE TRANSFERS made in the 7 years PRIOR TO DEATH

Question 4

Step (1) Calculate CUMULATIVE TOTAL.

The ‘Cumulative Total’ is the Total CHARGEABLE VALUE of all CHARGEABLE TRANSFERS made in the 7 years PRIOR TO DEATH.

What is the ‘Chargeable Value’?

Answer 4

Value of a CHARGEABLE TRANSFER after EXEMPTIONS & RELIEFS have been applied

Question 5

Step (1) Calculate CUMULATIVE TOTAL.

The ‘Cumulative Total’ is the Total CHARGEABLE VALUE of all CHARGEABLE TRANSFERS made in the 7 years PRIOR TO DEATH

What is a ‘Chargeable Transfer’? (2 components)

Answer 5

(a) Failed PETs
(b) LCTs

Question 6

Step (2) Identify TAXABLE ESTATE.

All assets will form part of the TAXABLE estate EXCEPT for 4?

Answer 6

(1) Remainderman in Life-Interest trust & Life Tenant still alive
(2) Insurance policy written in Trust
(3) Discretionary pension scheme

Question 7

Step (3) Value TAXABLE ESTATE.

(1) What will assets generally be VALUED at?
(2) What is the exception to this?
(3) For the exception in (2) what DISCOUNT will be applied?
(4) When will the exception in (2) NOT apply?

Answer 7

(1) MARKET Value on DATE OF DEATH
(2) JOINTY OWNED Property (JT or TIC)
(3) Discount value by 10%
(4) UNLESS spouses

Question 8

Step (4) Deduct DEBTS & EXPENSES.

(1) What ‘Debts’ will be deducted?
(2) What are the only 2 ‘Expenses’ that can be deducted?

Answer 8

(1) Debts owed on DATE OF DEATH
(2)
(a) REASONABLE funeral expenses
(b) Cost of TOMBSTONE

Question 9

Step (5) Apply EXEMPTIONS & RELIEFS.

What are the 4 ‘Exemptions & Reliefs’ that apply to the Death estate?

Answer 9

(1) SPOUSAL Exemption
(2) CHARITY Exemption
(3) BPR (Business Property Relief)
(4) APR (Agricultural Property Relief)

Question 10

Step (6) Apply RNRB (Residential Nil-Rate Band).

When is the ‘RNRB’ applied? (2 components)

Answer 10

(1) D’s Main RESIDENTIAL home (i.e. family home)
(2) INHERITED by a DIRECT DESCENDANT (i.e. children, grandchildren NOT spouse)

Question 11

Step (6) Apply RNRB (Residential Nil-Rate Band).

(1) What is the value of this?
(2) If the D has been PREDECEASED by a spouse, what is the MAX RNRB, they may have?

Answer 11

(1) £175,000
(2) £350,000

Question 12

Step (7) Apply NRB (Nil-Rate Band)

Explain what the ‘NRB’ is?

Answer 12

Each INDIVIDUAL can pass on £325,000 of their estate WITHOUT paying IHT

Question 13

Step (7) Apply NRB (Nil-Rate Band)

(1) What is the value of the NRB?
(2) If the D has been PREDECEASED by a spouse, what is the MAX NRB, they may have?

Answer 13

(a) £325,000
(b) £650,000

Question 14

Step (7) Apply NRB (Nil-Rate Band)

What must be done once the NRB available is calculated?

Answer 14

NRB Available - CUMULATIVE TOTAL (from Step (1))

Question 15

(8) Apply IHT DEATH RATE.

What is the IHT DEATH RATE?

Answer 15

40%