IHT - tax planning in will Flashcards
What are exempt beneficiaries in the context of gifts?
Gifts to a spouse/civil partner and gifts to charity
What are the types of qualifying assets?
Business Property and Agricultural Property
What if you want to give a qualifying asset to an exempt beneficiary?
- APR and BPR will be wasted
- Therefore possible solution: put the specific gift into a discretionary trust, claim BPR/APR and name the exempt beneficiary as a beneficiary of the trust
How is the benefit of relief apportioned in gifts of residue?
Between taxable and non-taxable beneficiaries - so could be wasted
What happens when a specific gift is made to an exempt beneficiary with residue to chargeable beneficiaries?
IHT only payable on part of residue which is paid to chargeable beneficiaries
What is the tax implication of a specific gift to a chargeable beneficiary and residue to an exempt beneficiary?
IHT payable on specific gift
What occurs when a specific gift is made to a chargeable beneficiary and residue to both chargeable and exempt beneficiaries?
IHT payable on gift and part of residue going to chargeable beneficiaries
What was the use of the NRB prior to 2007?
A will that left everything to a spouse did not utilise any of the NRB because the whole estate qualified for 100% spouse exemption. People left a sum equal to the NRB to a non-exempt beneficiary or trust.
How did the introduction of TNRB affect the use of NRB?
It does not matter as much. Clients may want to use their NRB still to benefit someone else, not wanting the spouse to control all assets, and there is an advantage to keeping the survivor’s estate smaller.
How is it common for unmarried couples to dispose of their estate?
Using a discretionary trust with the surviving member of the couple and children/grandchildren named as beneficiaries.
No spouse exemption.
What happens if one party has an estate less than the NRB?
If the poorer of the couple dies first, the NRB cannot be used in full. Tax planning may involve the richer of the two making transfers during their lifetime to equalise the value of the two estates.
What should clients with an interest in residential property know about RNRB?
They should be advised on how to structure their will to ensure the RNRB can be claimed by making a specific gift of property to direct lineal descendants.
What is preferred when drafting gifts of the NRB?
A formula clause is preferred, such as ‘I give as much of my nil rate band as is available to my daughter.’ - this allows for changes in the NRB
