Excepted estates (Introduction and 'small' estates) (Grants of representation)- FS Flashcards
(15 cards)
What are the two inheritance tax forms relevant to probate applications?
- Form IHT 400 – Used when inheritance tax is payable.
- Form IHT 205 – Used for Exempt estates where no inheritance tax is due.
What is Definition: Excepted Estate
An estate that meets specific criteria under the Inheritance Tax (Delivery of Accounts) (Excepted Estates) Regulations 2004, and does not require payment of inheritance tax. It qualifies for the simplified Form IHT 205.
What are the two categories of Excepted estates?
- Small Estates
- Exempt Estates
List: Requirements for a Small Estate
- Deceased died domiciled in the UK
- Total value of the estate + specified transfers + specified exempt transfers made within 7 years before death does not exceed the nil-rate band
- The total sum of Specified transfers made in the 7 years before death do not exceed the allowed limit
What is the Definition Nil Rate Band
The threshold up to which no inheritance tax is charged. For example, it is £325,000 as of the current example but subject to annual revisions. It may be transferrable between spouses/civil partners if unused.
What is the Definition: Specified Transfer
A lifetime gift of certain types of property (e.g. cash, personal assets, land, quoted shares) made within 7 years before death. If unquoted shares are gifted, the estate will not qualify as accepted.
List: Categories of Specified Exempt Transfers
- Transfers between spouses or civil partners
- Gifts to charity
- Gifts to political parties
- Gifts to housing associations
- Maintenance funds for historic buildings
- Employee trusts
What is the Definition: Exempt Estate
An estate that is exempt from inheritance tax because its value is within permitted limits and/or it qualifies for exemptions due to assets passing to spouses, civil partners, or charities.
What are the two key conditions for an estate to qualify as an exempt estate?
- Gross value of the estate (including specified transfers and specified exempt transfers within 7 years of death) must not exceed £3 million.
- The combined total of:
* the net chargeable estate after deducting debts and exemptions for spouse/charity, plus
- any specified transfers and specified exempt transfers within 7 years of death
must not exceed the nil-rate band (£325,000 or up to £650,000 where the deceased sposue pre deceased him and did not use his or hers nil rate band.
What exemptions are available to reduce the chargeable value of the estate?
- Spouse/civil partner exemption
- Charity exemption
- Both apply to transfers made under the will, intestacy, or lifetime gifts within seven years before death
Definition of Net Chargeable Estate
The gross estate minus any debts, funeral expenses, and qualifying spouse or charity exemptions. It forms the base for calculating whether the estate exceeds the nil-rate band for IHT purposes.
List: Assets Typically Included in Gross Estate Valuation
- Half share in jointly owned home
- Bank accounts
- Personal chattels
- Shares or securities
- Lifetime specified and exempt transfers made within 7 years of death
What is the purpose of calculating the total of specified and exempt transfers made in the 7 years before death?
To assess whether lifetime gifts (either taxable or exempt) when combined with the net estate, push the total value over the nil-rate band.
What inheritance tax form should be used for an exempt estate?
Form IHT205 – used when the estate is a small or exempt accepted estate and no inheritance tax is payable.
By when must personal representatives submit inheritance tax forms to HMRC and the probate registry?
Inheritance tax forms must be completed and submitted within 12 months of the end of the month in which the deceased died, in accordance with HMRC requirements for estate administration.
