IHT - Death Estate Flashcards
(18 cards)
What is the 7-step process for calculating inheritance tax (IHT) on the death estate?
- Calculate cumulative total
- Identify assets in the taxable estate
- Value the taxable estate
- Deduct debts/expenses
- Apply exemptions/reliefs
- Apply residence nil rate band (RNRB)
- Apply basic nil rate band (NRB) and calculate tax
What general rule determines what is included in the taxable estate?
All property to which the deceased was beneficially entitled at death, unless specifically excluded.
List 5 assets included in the taxable estate.
- Jointly owned property
- Property subject to a reservation
- Donationes mortis causa
- Statutory nominations
- Some life interests in trusts
What happens to joint property for IHT purposes?
It is treated as if the joint tenancy was severed, and the deceased’s share is included in their taxable estate.
What is a GROB?
A gift with reservation of benefit—a gifted asset that the donor continues to use, which is taxed as part of their death estate.
At what value are estate assets included?
Market value at the date of death
How are jointly owned properties valued for IHT?
The deceased’s share is discounted by 10%, unless jointly owned with a spouse, in which case related property rules apply.
How are quoted shares valued for IHT?
Take the lower price and add ¼ of the difference between the high and low prices on the day of death.
What types of debts are deductible?
- Debts owed by the deceased at death
- Funeral expenses and tombstone costs
(Not post-death admin expenses)
What is the value of the RNRB?
£175,000, plus up to 100% transferred RNRB from a pre-deceased spouse.
When is the RNRB available?
- Deceased died on or after 6 April 2017
- A qualifying residential interest (QRI) is left
- The QRI is closely inherited by a direct descendant
What is the tapered withdrawal of RNRB?
For estates over £2 million, RNRB reduces by £1 for every £2, tapering to £0 at £2.35 million (or £2.7 million with full transferred RNRB).
How is NRB applied?
- Apply 0% rate to any value within available NRB
- Apply 40% to remaining value above the NRB
- Use transferred NRB if available
Can RNRB be used for lifetime transfers?
No—RNRB only applies to death estates, not PETs or LCTs.
What happens to trust property with a pre-2006 life interest?
The life tenant’s estate includes the capital value of the trust fund
What happens to an immediate post-death interest in trust?
The value is included in the life tenant’s death estate
What types of assets are excluded from the IHT estate?
- Excluded property (e.g. remainder interests)
- Life insurance policies written in trust
- Discretionary pension payments
