IHT - death estate Flashcards
What is the Cumulative Total?
Value of All Chargeable Transfers made in 7 years prior to the death
It is the bit that you actually pay
What does the Taxable Death Estate include?
All Property to which the deceased was beneficially entitled at the date of death
If the deceased owned a house as TIC, is this property treated as part of the deceased’s estate?
Yes - the deceased’s share passes into estate for tax and distribution purposes
What is the treatment of Joint Tenancy for IHT purposes?
Deemed severance of the joint tenancy immediately before death
Although surivorship applies for distribution, their share of the property is taxed under IHT
What is a Gift with Reservation of Benefit (GROB)?
If a person gives away an asset but retains benefit, the value of the asset at date of death is included in the donor’s IHT estate
It can also be taxed as a a failed PET as well as being part of the succession estate - very bad.
How can one avoid GROB rules?
By not deriving any benefit from the assets given away or by paying a market value rent
Are DMCs included in the taxable estate?
Yes - the conditional nature of gift means it is still part of the deceased’s estate for IHT purposes
Do Statutory Nominations form part of the IHT estate?
Yes, to Friendly, Industrial and Provident societies
What is the treatment of Interests in Possession Trusts created before 22 March 2006?
Capital value of all interest in possession trusts treated as being owned by the person with the interest in possession for IHT purposes
What is the treatment of Interests in Possession Trusts created on or after 22 March 2006?
- if a life interest is created after someone’s death, this is an immediate post death interest. The capital value is included in their taxable death estate.
- If a new inter vivos trust is created, the life tenant’s interest is not included in their taxable estate
What are examples of Excluded Property?
- Remainder interests in life interest trusts
- Insurance policy written on trust
- Discretionary pension schemes
How are insurance policy proceeds treated if written in trust for another?
The proceeds are not included in the deceased’s estate
What happens to insurance policy proceeds payable to the deceased’s estate?
The amount would be included in taxable estate
Are discretionary lump sum payments from pension fund trustees included in the taxable estate?
No, they are not included
When will pension scheme lump sums be included in the taxable estate?
Lump sums payable by right to the estate of the deceased are included
How are assets in the estate valued?
Assets in the estate are valued at market value at the date of death.
How is related property valued when owned by spouses?
Each party’s share is valued at their proportionate share of the combined pair if assets are worth more when valued together.
What is the valuation adjustment for joint property?
The value of the deceased’s share is reduced by 10-15% to reflect the difficulty of selling a share of the property rather than the whole, except when co-owners are married.
What debts can be deducted from the taxable estate?
Money the deceased owed, reasonable funeral expenses, and a tombstone can be deducted from the IHT amount.
What happens to other post-death expenses?
Other post-death expenses are payable from the estate but cannot be deducted from the value of the IHT estate to reduce overall tax due.
What exemptions/reliefs can be deducted?
- spouse exemption
-charity exemption
-business property relief - agricultural property relief.
How is the RNRB applied?
Establish the value of RNRB (including TRNRB) and apply a rate of 0%.
How is the basic NRB applied and tax calculated?
Establish the value of NRB (including RNRB) and apply a rate of 0%. Apply a death rate of 40% to the rest.
What are the steps for calculating IHT on the death estate?
- Caclulate cumulative total
- Identify assets in the taxable estate
- Value the taxable estate
- Deduct debts/expenses
- Apply exemptions and relief
- Apply RNRB
- Apply basic NRB and calculate tax
