Lecture Five: Inheritance Tax Flashcards
When totalling beneficial entitlements under the estate, which trust interests apply?
Trusts where an individual is beneficially entitled to all the income from them.
When totalling beneficial entitlements under the estate, what is an example of property subject to a reservation?
A house has been legally sold, but the deceased was still living it.
What is the rule around beneficial entitlement in joint property?
It counts in IHT calculations. Half of the total value applies.
What is agricultural property and when does an individual qualify for agricultural property relief?
Agricultural property means agricultural land or pasture. It includes woodlands and buildings used for rearing animals, grazing land and cottages/farm buildings/farmhouses.
The value of one’s agricultural property must consist of at least 80% of their total property value. Must be occupied for at least two years, or 7 years if occupied by someone else.
When is 100% APR applied and when is 50% APR applied?
100% = donor has right to vacant possession immediately before transfer or can be obtained within 12 months of transfer; tenanted and letting started since 1995;
50% = AGP transfers where the land has been let before September 1995.
When can the residence nil rate band of £175,000 apply?
An individual leaves property to spouses/civil partners/child/grandchild/other lineal descendants. A qualifying residence is any property an individual lived in during their lifetime.
How do you apply the RNRB?
You essentially deduct either the full RNRB of £175,000 or the lower value of the property from the overall value of the estate.
Tapering relief applies to lifetime gifts where an individual dies between 3-7 years of making a gift. How does tapering relief apply?
Tapering relief only applies where the cumulative value of gifts exceeds £325,000. Taper relief reduces the tax payable on the portion of the gifts over the IHT allowance.
What is the key difference between PETs and LCTs in terms of calculations?
PETs are taxed at 40% upon death. LCTs are taxed 20% upon making the gift and a further 40% upon death.
Where do Annual Exemption and Small Gifts Exemption Apply?
Lifetime gifts only (not the death estate).
Can RNRB apply in the instance of rental property?
No, unless there is information to suggest that the individual lived in the property at some point.
