Wills 10 Flashcards
When do PRs have to deliver an account with HMRC?
- Within 12 months from the end of the month of the deceased’s death. In practice, this normally happens before then, as interest on the IHT due on the estate runs from six months-and the PRs cannot obtain a grant until they have paid the tax due.* Note, no formal account need be filed for small or exempt estates unless HMRC request one.
What value of the assets is relevant to calculating IHT due?
Open market value of assets at the date of death.
What must be sent to HMRC by PRs in relation to IHT?
- The completed account* All necessary schedules* Payment should be sent to HMRC.* Form IHT421 (Probate summary)
If IHT is to be paid from the deceased’s bank accounts, what document needs to be sent to each bank concerned?
A separate schedule IHT423 should be sent to each bank concerned.
What happens with the IHT receipt from HMRC?
- Form IHT421 will be receipted by HMRC and returned to the solicitor. * It is then lodged at the Probate Registry with other papers to obtain the grant.
If the deceased was a co-owner of land at their death, how is this land valued for the purposes of IHT?
The market value of their interest will usually be discounted to reflect the difficulty of selling a part interest in land.* A 15% discount is normally considered acceptable for residential property* A 10% discount for investment property. Note: HMRC will not permit any discount in value for land co-owned with spouses or civil partners (it is valued as ‘related property’.
If assets other than land are co-owed by the deceased at death, how are they valued?
Market value. The discount in relation to co-owned land is not applicable to other assets.
What 2 types of estates do not have to pay IHT?
Small estates and excepted/exempt estatesNo formal account need be filed unless HMRC request one.
What is a small estate?
Estates of UK domiciliaries that do not exceed the IHT threshold (‘nil rate band’, presently £325,000)No formal account need be filed unless HMRC request one.
What is an excepted/exempt estate?
Estates of UK domiciliaries that:* do not exceed £3 million, and * the net chargeable estate (after deducting liabilities and any spouse or charity exemption on death) does not exceed the IHT thresholdNo formal account need be filed unless HMRC request one.
What value of foreign assets causes an estate not to be exempt?
More than £100,000
In what situtation will an estate bigger than a small/exempt estate qualify as an excepted estate?
When the estate can benefit from the transferable nil rate band from a predeceased spouse or civil partner if: * the estate value is less than twice the IHT threshold (presently £650,000) and * the unused inheritance tax allowance from a late spouse or civil partner can be transferred to the deceased. * the spouse’s estate did not qualify for any agricultural or business relief
G died in March 2020. Her assets were worth £520,000, and she had debts of £40,000. Her will leaves everything equally to her two nephews. She had made life- time gifts of £80,000 to her nephews in June 2016. G’s civil partner, H, died in December 2018 and left her entire estate to G. Is IHT owed?
No, This is a ‘small’ excepted estate. The aggregate of G’s gross estate (£520,000) plus her specified transfers (£80,000) is £600,000, which is below the nil rate band threshold of £650,000. The threshold is increased by 100% from £325,000 as H did not use any of her nil rate band on her death due to the spouse/civil partner exemption.
A and B were married and jointly owned a home. A died and his only significant asset was the home worth £500,000 at the time. A’s interest in the home was passed to B according to his will. At the time of A’s death, the nil rate band was £325,000. B has now died and her will gives the home to her sister. The home is now worth £600,000. The nil rate band is still £325,000. Is IHT owed on the home?
Because transfers between spouses are exempt from inheritance tax, A didn’t use any of his nil rate band when he gave the house to B. A’s entire nil rate band can be transferred to B. So now, A’s estate has an allowance of £650,000. If the only asset in A’s estate is the house worth £600,000, the estate won’t have to pay any inheritance tax because it’s less than the threshold of £650,000.
S and J were married. J died leaving £25,000 to his friend and the rest of his estate to S. At the time J died, the nil rate band was £250,000. Years later. S dies when the nil rate band is £325,000. What value of NRB is S’s estate entitled to?
J’s estate used up 10% of the NRB when he gave his friend £25,000. S gets her own £325,000 nil rate band, plus the additional 90% that J did not use. We use the current nil rate band when calculating the percentage, so S is due 90% of £325,000 or another £292,500. Her total nil rate band is £617,500.
