Death Estate and valuation Flashcards
(34 cards)
Does death estate include anything acquired by reason of death (such as proceeds of life assurance policy)
Yes
Who pays tax on the death estate
Personal representative
Assets that pass to … are exempt from IHT
Spouse/Civil partner (outright or to trust in which they have interest in possession)
Charity
Qualifying political party
Deduct / don’t deduct from death estate
Debts incurred for full consideration
Deduct
Not gambling debts
Deduct / don’t deduct from death estate
Taxes imposed by law
Deduct
income and capital gains
Deduct / don’t deduct from death estate
Reasonable funeral expenses (inc tombstone)
Deduct
Deduct / don’t deduct from death estate
Unpaid debts if remain unpaid for commercial reason and not to obtain tax advantage
Deduct
Deduct / don’t deduct from death estate
Loans obtained to acquire or enhance excluded property (situated outside UK and individual entitled is UK Dom)
Don’t deduct
Where debt is charged on specific property the debt is
Deductible primarily from the property on which it is charged
QSR formula
Tax paid on first * relevant % * net transfer/Gross transfer
When does fall in value relief apply
Where property transferred within 7 years of death either
- if owned, the open market value on death is less than time of property
- If sold (to unconnected) by the transferee before death and sale proceeds were less than value at time of transfer
Fall in value relief does not apply to
Plant and machinery
Chattels with UL < 50 years
Estate entitled to RNRB if:
Dies on or after 6 April 2017
Own a home or share of one so that it is included on death estate
Home is inherited by direct descendant (children / grandchildren)
RNRB amount
£175,000
Value of a home for death estate
Open market value of the property less any liabilities secured on it (e.g. mortgage)
If death estate valued at more than £2m
RNRB is tapered away by £1 for every £2 the estate is worth more than £2m threshold therefore > £2.35m no RNRB
Tapering of RNRB is calculated on
Value of all assets less debts and liabilities
BUT BEFORE deducting exemptions such as spouse / charity exemptions / reliefs
NRB transfer
Between spouse
if spouse dies with used NRB, the unused proportion is transferred to the surviving spouse
Claiming the transfer of NRB
When surviving partner dies, personal representatives must make claim by later of
- 2years from end of month of death of survivor or
- three months from the date the personal representatives first act for the survive
HMRC can accept a late claim
Transfer of unused RNRB when
Surviving spouse dies after 5 April 2017
if die before, deemed RNRB 100k
IHT charge if 10% or more left to charity
36%
Net chargeable estate
Value of the estate after deducting all available reliefs, exemptions and remaining NRB but before deducting charity and RNRB.
When does reduced rate of IHT not apply
If personal representatives elect for it not to apply (benefit minimal, don’t want to incur cost of valuing items)
Value of a transfer of value is
the diminution in value of the transferor’s estate
