IHT

Question 1

What governs Inheritance Tax (IHT) in the UK?

Answer 1

Inheritance Tax Act 1984

Question 2

List the three main occasions when IHT may be charged.

Answer 2

• On death
• On lifetime gifts made to individuals within seven years prior to death
• On lifetime gifts to a company or into a trust

Question 3

What is charged to IHT upon death?

Answer 3

Value of a person’s estate immediately before their death

Question 4

What is a Potentially Exempt Transfer (PET)?

Answer 4

A transfer that becomes exempt if the transferor survives for seven years

Question 5

What happens if the transferor dies within seven years after making a PET?

Answer 5

The transfer becomes chargeable to IHT

Question 6

When are lifetime gifts to a company or trust chargeable to IHT?

Answer 6

At the time when it is made, unless the trust is for a disabled person

Question 7

Define a chargeable transfer.

Answer 7

A transfer of value made by an individual that is not an exempt transfer

Question 8

What constitutes the ‘estate’ in terms of IHT?

Answer 8

All property to which the deceased was beneficially entitled immediately before death, except excluded property

Question 9

What is considered excluded property under IHTA 1984?

Answer 9

• Life assurance policy written in trust
• Discretionary lump sum from pension fund

Question 10

What is the probate value?

Answer 10

The value of the assets immediately before death, based on what the property might fetch in the open market

Question 11

What debts and expenses can be deducted when calculating IHT?

Answer 11

• Debts incurred for money or money’s worth
• Reasonable funeral expenses

Question 12

What is the spouse or civil partner exemption in IHT?

Answer 12

Property passing to a deceased spouse or civil partner is exempt under IHTA 1984 s 18

Question 13

What is Business Property Relief (BPR)?

Answer 13

Relief that applies to business property owned for two years before transfer, offering reductions of 100% or 50%

Question 14

What is the ordinary nil rate band (NRB) amount for IHT?

Answer 14

£325,000 at 0%, 40% on the excess

Question 15

What happens if 10% of the estate is donated to charity?

Answer 15

The IHT rate is reduced from 40% to 36%

Question 16

What is the Residence Nil Rate Band (RNRB)?

Answer 16

An additional £175,000 for estates after 6 April 2017, applicable to qualifying residential interests

Question 17

What is the annual exemption for lifetime gifts?

Answer 17

£3,000 each tax year, can be carried forward for one year

Question 18

What is the exemption limit for small gifts?

Answer 18

Gifts of £250 or less are exempt

Question 19

What are the conditions for Normal Expenditure out of Income exemption?

Answer 19

Part of normal expenditure that leaves the transferor with sufficient income to maintain their standard of living

Question 20

What is the tapering relief for PETs?

Answer 20

Reduces IHT based on the time elapsed since the gift was made, applied if the transferor dies within seven years

Question 21

What is the impact of death on PET and LCT?

Answer 21

PET becomes chargeable if the transferor dies within seven years, and cumulative totals include any LCTs made in that period

Question 22

What is the requirement for a valid will?

Answer 22

• Capacity
• Intention
• Formalities for execution

Question 23

What is required to prove capacity in making a will?

Answer 23

Soundness of mind, memory, and understanding regarding the nature of acts and effects

Question 24

What does the Wills Act 1837 state about the formalities for execution?

Answer 24

A will must be in writing, signed, and witnessed by two or more witnesses

Question 25

What is a joint property ownership's effect upon the death of one owner?

Answer 25

The deceased's interest passes by survivorship

Question 26

What happens to life assurance policies upon the policyholder's death?

Answer 26

The proceeds are paid to the beneficiaries specified in the policy

Question 27

What is a reversionary interest under IHTA 1984?

Answer 27

A future interest under a settlement that is considered excluded property

Question 28

Fill in the blank: A _______ is a transfer that becomes chargeable to IHT if the transferor dies within seven years.

Answer 28

Potentially Exempt Transfer (PET)

Question 29

True or False: Lifetime gifts to a disabled trust are immediately chargeable to IHT.

Answer 29

False

Question 30

What is the maximum exemption for gifts in consideration of marriage?

Answer 30

* £5,000 by a parent * £2,500 by a remoter ancestor * £1,000 by others

Question 31

What case established the requirement for consciousness of what is going on in witnessing?

Answer 31

Brown v Skirrow 1903 ## Footnote This case emphasizes the importance of the witness's awareness during the signing of a will.

Question 32

What does the Wills Act 1837 (Electronic Communications) (Amendment) (Coronavirus) Order 2020 allow regarding witnessing?

Answer 32

Presence by means of videoconference or other visual transmission ## Footnote This amendment allowed wills to be witnessed remotely from 28 September 2020 until 31 January 2024.

Question 33

What is the presumption regarding due execution if a will includes an attestation clause?

Answer 33

Presumption of due execution is made ## Footnote This means that if the will is properly attested, it is assumed to have been executed correctly.

Question 34

What are the requirements for a witness to a will?

Answer 34

Must understand the significance of being a witness ## Footnote This ensures that the witnesses are aware of their role in the process.

Question 35

What happens if a witness to a will is also a beneficiary?

Answer 35

The will remains valid, but the gift to the witness fails ## Footnote This is stated in section 15 of the Wills Act.

Question 36

What is one way a will can be revoked?

Answer 36

By a later will or codicil ## Footnote Section 20 of the Wills Act states that a will may be revoked in whole or in part by a later will or codicil.

Question 37

What happens to a will if the testator marries after executing it?

Answer 37

The will is automatically revoked ## Footnote This is outlined in section 18 of the Wills Act, except in certain circumstances.

Question 38

What occurs if a civil partnership is converted to a marriage regarding an existing will?

Answer 38

The conversion will not revoke an existing will ## Footnote This is a new provision in section 18 WA.

Question 39

What is the effect of divorce or dissolution of a civil partnership on a will?

Answer 39

Will remains valid, but certain provisions take effect as if the former spouse had died ## Footnote This is due to amendments made by the Law Reform (Succession) Act 1995.

Question 40

How can a will be revoked by destruction?

Answer 40

Physical destruction with intention to revoke ## Footnote This is specified in section 20 of the Wills Act.

Question 41

What must alterations to a will be executed like?

Answer 41

Like a will ## Footnote This ensures that any changes are legally valid.

Question 42

What is the role of executors in a will?

Answer 42

People dealing with the estate appointed by the will ## Footnote Executors are responsible for administering the estate according to the will.

Question 43

What happens to a specific legacy if the testator no longer owns that property at death?

Answer 43

The specific legacy will fail ## Footnote This concept is known as ademption.

Question 44

What is a presumption regarding the testator's intent with respect to specific assets?

Answer 44

Presumption that the testator meant to dispose of the particular asset they owned at the date of the will ## Footnote This helps clarify the testator's intentions.

Question 45

What happens if a beneficiary dies before the testator?

Answer 45

The gift fails or lapses ## Footnote If the legacy lapses, the property falls into residue.

Question 46

According to the Law of Property Act s 184, how is the order of deaths presumed if two people die at the same time?

Answer 46

The elder died first ## Footnote This presumption helps resolve issues of inheritance.

Question 47

What occurs to gifts made to joint tenants if one dies before the testator?

Answer 47

Will not lapse unless all donees die before the testator ## Footnote This means that the surviving joint tenant retains their share.

Question 48

What does Wills Act 1837, s 33 state about gifts to children and remoter issue?

Answer 48

Gifts left for children who die will pass to their issue surviving the testator ## Footnote This allows for continuity in inheritance.

Question 49

Fill in the blank: Any gift for a former spouse or civil partner shall pass as if the former ______ had died.

Answer 49

spouse/civil partner ## Footnote This rule ensures that former partners do not benefit from a will after separation.

Question 50

What happens to property undisposed of by a will?

Answer 50

It passes under intestacy rules ## Footnote This means it will be distributed according to statutory provisions.