WAE IHT Flashcards

Question

How to calculate IHT on death?

Answer 1

Clever – Cumulate prior gifts (7 years) Investigators – Identify estate assets Value – Value assets at market rate Dead – Deduct debts Estate – Exemptions & reliefs Records – Residence NRB Brilliantly – Basic NRB + calculate IHT

Answer 2

If the net estate exceeds £2 million, the RNRB is reduced by £1 for every £2 over that threshold. No RNRB is available once the estate exceeds: £2.35 million (if just RNRB) £2.7 million (if full transferable RNRB also claimed) Tapering applies before applying the RNRB.

Answer 3

The deceased sold, gifted, or downsized their qualifying residential interest (QRI) after 8 July 2015 If retained, the QRI would have qualified for RNRB (i.e. left to direct descendant) The deceased left other assets to a direct descendant that represent the lost QRI

Answer 4

£1,000,000

Answer 5

When property is co-owned not with a spouse/civil partner and the deceased held a share (e.g. tenancy in common or joint tenancy severed for IHT purposes). → 10% reduction reflects difficulty in selling a partial interest.

Answer 6

Only reasonable funeral expenses and tombstone costs. → Legal fees, probate costs, etc., are not deductible. Other post-death expenses are payable from estate assets but cannot be deducted from the value of the IHT estate to reduce the overall tax due

Answer 7

Unquoted shares, quoted shares, business or interest in a business, assets owned by taxpayer but used for business

Answer 8

At least one condition must apply: - the party had at least 2 MPs elected; or the party had at least 1 MP elected and at least 150,000 votes given to candidates representing that party

Answer 9

The donee (recipient of the gift) bears the IHT burden unless the will clearly states otherwise (i.e., a "contrary intention").

Answer 10

❌ No. “All taxes” is not sufficient. It only covers tax on dispositions made by the will — not IHT on lifetime gifts.

Answer 11

By expressly stating in the will that IHT on lifetime gifts is to be paid from the residue of the estate.

Answer 12

The surviving co-owner bears the IHT on the deceased's share.

Answer 13

The nominated beneficiary is liable for the IHT attributable to that asset.

Answer 14

The lifetime donee (recipient of the gift in contemplation of death) pays the IHT.

Answer 15

The trustees are liable for the IHT on trust property.

Answer 16

The lifetime donee pays the IHT on the value of the gift.

Answer 17

The life tenant is treated as owning the trust capital under s49(1) IHTA. The value is included in their estate on death.

Answer 18

A life interest arising on death (e.g. by will) on or after 22 March 2006, taxed like an IIP — trust capital is included in the life tenant's estate under s49A IHTA.

Answer 19

When the trust is created inter vivos (during lifetime) after 22 March 2006 — the life tenant is not treated as owning the capital.

Answer 20

No — if the payment is made at the trustees' discretion, it is not included in the taxable estate for IHT.

Answer 21

✅ Included in the taxable estate — the deceased had an enforceable right to the money.

Answer 22

❌ No — it is not binding, though trustees often follow it in practice.

Answer 23

Because the deceased had no entitlement to the money — it was at the trustees’ discretion.

Answer 24

Discretionary = excluded from estate Payable by right = included in estate

Answer 25

A non-binding document where the pension scheme member indicates who they would like to receive discretionary death benefits. Trustees are not legally obliged to follow it but usually do in practice.

Answer 26

Assets are valued at their market value at the date of death.

Answer 27

Use the lower of the two prices on the Stock Exchange Daily List, then add ¼ of the difference between the high and low values.

Answer 28

Each party’s share is valued proportionately from the combined total, since assets may be worth more together (e.g. as a set).

Answer 29

Apply a 10–15% discount (typically 10%) to reflect reduced value of a part interest. ❌ No discount if co-owned by spouse — related property rules take priority.

Answer 30

When the co-owner is a spouse, related property rules override the discount.

Answer 31

Debts due at date of death (e.g. credit cards, loans). Post-death expenses only if they are reasonable funeral costs (incl. tombstone).

Answer 32

❌ No — they can be paid from the estate but cannot reduce the IHT estate value.

Answer 33

Reasonable funeral expenses, including tombstone costs.

Answer 34

How much of the Nil Rate Band (NRB) is already used — this affects how much of the PET is taxed at 0% vs 40%.

Answer 35

We look at any chargeable transfers made in the 7 years before the PET, to see if they used up any of the NRB.

Answer 36

Because a previous chargeable gift (like an LCT) might have already used up part of the NRB — and that reduces what’s left for the PET.

Answer 37

14 years — 7 years before death to catch PETs, and then 7 years before a PET to catch earlier LCTs.

Answer 38

7 years before that PET — so up to 13 years before death.

Answer 39

❌ No — it’s too old. But it might still affect how a later PET is taxed, if it happened within 7 years of the PET.

Answer 40

To see if there are older chargeable transfers that reduce the NRB available for that PET now that it’s failed.

Answer 41

the efficient and lawful arrangement of a client’s affairs in a manner which minimises their liability to tax

Answer 42

a form of tax avoidance which often involves the taxpayer entering into complex or artificial arrangements which have the overall effect of reducing their tax liability. These schemes comply with legislation but often do not reflect the intention behind the law. This tax planning may involve exploiting loopholes or inadvertent gaps in drafting.

Answer 43

where a taxpayer withholds information about assets or income, or otherwise takes steps to avoid paying the tax they are liable for – this is unlawful