IHT Death Tax

Question 1

What might be used to increase Nil-Rate band on Death?

Answer 1

1. Transferable Nil Rate Band
   - from predeceased spouse(s)
2. Residential Nil Rate Band
   - for residence if left to issue or their children

Question 2

When is Transferable Nil-Rate Band Available?

Answer 2

If predeceased spouse(s) did not use all their nil rate band
- commonly arises where they leave all or part of estate to spouse and therefore do not pay IHT on it
- can be taken from more than one predeceased spouse
- limit on a 100% uplift

Question 3

How is transferable nil rate band calculated?

Answer 3

As percentage
- calculate what percentage of nil rate band first spouse did not use
- multiply second spouses nil rate band by that percent
- AGAIN cannot uplift more than 100%

Question 4

Limits of Transferable Nil Rate Band

Answer 4

• Cannot be used against CLT (once personal nil rate band is used up immediate tax must be paid to CLT exceeding this)
• claim for transfer NEEDS to be SPECIFICALLY made by PRs (not automatic)

Question 5

When can Residential Nil Rate Band be used?

Answer 5

Can be done in addition to transferable

Used for deceased estate includes home that was AT SOME POINT their residence AND it is left to lineal descendant
- ALSO applies where only part share of home is left to lineal descendant (can claim for 1/4 of value if they are give 1/4 share in home)

Can be transferred between spouses if not used
- up to 100%

Question 6

What is a lineal descendant

Answer 6

Children, step-children, adopted children, grand children, great-grandchildren, foster children

OR any of the above spouses

Question 7

Calculating Residential Nil Rate Band

Answer 7

(Value of home at time of death) - (liabilities on home such as mortgage)

Only up to limit currently at £175,000

Question 8

Tapering of Residential Nil Rate Band

Answer 8

If ESTATE has NET value over £2m
- then tapered £1 for every £2 over

NET Value
- assets minus liabilities
- before applying reliefs (agriculture/business) and exemptions (spouse/charity)

Question 9

Residential Nil-Rate Band and Downsizing

Answer 9

If deceased downsized to less value able home
- from one where full amount of RNRB was available to one where only part is available
- then can still claim RNRB that would have applied to old property

Question 10

What is quick succession relief?

Answer 10

Applies when someone dies within 5 years of inheriting something on which IHT was paid
- decreases by 20% for each year between the deaths

Question 11

What is post mortem relief?

Answer 11

Available when PRs sell some estate property

1. Quoted Shares
   - net loss of sale of all by PR within 1 year of death
2. Land and Buildings
   - is sale of all is a net loss by PR over 3 years post death

Question 12

Proof needed for transferable nill rate band application.

Answer 12

• deceased’s grant

(if relevant)
- deceased’s will/codicil
- Deed of Variation (if variation)