IHT - Liability and Burden Flashcards
(16 cards)
Who is liable for IHT on a lifetime chargeable transfer (LCT) during lifetime?
The donee, typically the trustees, are liable to pay IHT from the settled assets.
What happens if the donor elects to pay IHT on an LCT?
The gift is grossed-up, and the IHT is calculated on the total loss to the donor’s estate, which includes the tax paid.
Who is liable for IHT on failed PETs and re-assessed LCTs?
The lifetime donee, not the PRs—unless the donee fails to pay within 12 months of the end of the month of death.
What happens if the donee doesn’t pay the tax?
The PRs become liable and must use estate assets to pay, impacting the residuary beneficiaries.
Who pays the IHT on the free estate?
The PRs—this is a general testamentary expense
From what part of the estate is this IHT paid?
From residue, unless the will shows a contrary intention
Are specific and general legacies treated as free of tax?
Yes, unless the will states otherwise. It is assumed they are free of tax and the residue bears the burden.
What happens if a gift is “subject to tax”?
The beneficiary pays the tax, so the gift is reduced (e.g. £100 gift → £60 net after 40% tax).
Can the testator vary who bears IHT within the will?
Yes—but the intention must be clearly expressed, and the variation affects only the burden, not the overall liability.
Can a will make all gifts “free of tax”?
No—this would leave no assets to pay the IHT, making the clause ineffective.
Who pays the IHT on joint property?
The surviving co-owner.
Who pays the IHT on a GROB?
The donee who received the gift.
Who pays the IHT on a statutory nomination?
The nominated beneficiary.
Who pays the IHT on trust property?
The trustees.
How is IHT apportioned across different types of assets?
Based on the proportionate value of each asset in relation to the total taxable estate.
Do PRs pay the IHT on assets they don’t control?
No—recipients or trustees pay the IHT on non-succession estate items.
