potentially exempt transfers, clock, time, money, stack, table, outdoors, family, savings, iht, willpack, logo, blue

Potentially Exempt Transfers

By | Gifting | No Comments

Gifts made during lifetime may be considered when calculating IHT on death if they do not fall into any of the inheritance tax exemptions and allowances (see our previous newsletter). These are known as Potentially Exempt Transfers (or PETs). To be considered as a PET, the gift must be either a gift to an individual, to a disabled person’s trust or finally if an Interest in Possession (IIP) trust comes to an end but continues as a disabled persons trust. If the giver dies within 7 years of making the PET, the gift will become chargeable and be considered as part of their estate on their death. The deceased’s NRB will firstly be applied towards any PETs. If a person has made multiple PETs, NRB will be applied to the earliest PET first. If there is any NRB leftover, it will then be applied to the next PET until NRB…

Read More
IHT, Inheritance, Tax, people, paper, table, pen, desk, suit, adults, review, willpack, logo, blue, text

Inheritance Tax Review – An Update

By | Inheritance Tax | No Comments

Potentially changing the Inheritance Tax regime is big news at the moment and the past few weeks have provided some interesting developments. As mentioned in a previous article, the Chancellor of the Exchequer has requested that the Office for Tax Simplification carry out a review of the Inheritance Tax regime. Soon after this, the Office of Tax Simplification provided a scoping document for the review. On 27th April, the Office for Tax Simplification provided their call for evidence. This call comprises of two parts. Firstly, there is an online survey aimed at the public directly to access the public’s practical experience or understanding of Inheritance Tax. Secondly, the Office for Tax Simplification has also provided a set of consultation questions aimed at the public, professionals and business owners. These questions cover areas such as: Difficulties in completing IHT Forms Difficulties in administering an estate and completing probate Interacting between lifetime…

Read More

Inheritance Tax Exemptions and Allowances

By | Gifting, Inheritance Tax | One Comment

Where clients are wishing to reduce their potential inheritance tax liability, there are lifetime inheritance tax exemptions and allowances they should be made aware of. For a number of these, they may need to seek regular advice from tax specialists to ensure that they will qualify for an exception or do not exceed an allowance. Annual Exemption Each person has an annual exemption of £3000 per year that can be gifted in any way that will not be considered for inheritance tax purposes. If the full £3000 is not used fully in that year, any unused allowance may be rolled over to the next year once. Small Gift Exemption Small gifts of £250 or less are exempt from inheritance tax. A person can make as many of these gifts as they like each tax year as long as the total amount gifted to each individual is less than £250. This…

Read More
Calculator, paper, pen, tax, logo, blue, text, white

Chancellor requests a review of Inheritance Tax

By | Inheritance Tax | One Comment

In a letter published on the 31st January, the Chancellor of the Exchequer has requested that the Office for Tax Simplification carry out a review of the inheritance tax regime. The Chancellor has acknowledged that the inheritance tax system is complex and wished for simplification to ensure that the system is fit for purposes and operates as smoothly as possible. It is requested that the review considers: Technical and administrative issues, such as the process of submitting returns and paying any tax due Practical issues around routine estate planning and disclosure How current gift rules interact with the wider inheritance tax system and whether the current system causes distortions when making decisions about transfers, investments and other transactions. A document covering the scope of the review will be agreed and published by the Office for Tax Simplification in due course. This request for a review comes less than a year…

Read More

Residential Nil Rate Band – Qualifying Residential Interest

By | RNRB | No Comments

Residential Nil Rate Band – Qualifying Residential Interest The rules for the Residential Nil Rate Band (RNRB) introduce a variety of new terms that need defining. The first of these is a Qualifying Residential Interest. The new S8H Inheritance Tax Act 1984 defines a Qualifying Residential Interest (QRI) as an interest in a dwelling which has been the deceased’s residence at some time during his period of owning the property. This includes a property’s garden or grounds. Residence itself is not defined in the Act. In the majority of cases it will likely be clear whether a property is a person’s residence (as the majority of people will only own one property, their main residence). For when it is not, it is assumed that Capital Gain Tax case law will be relevant in this area. The property doesn’t have to be a main home and there is no minimum ownership…

Read More

Potentially Exempt Transfers (PETs)

By | Inheritance, Wills | No Comments

Section 3A of the Inheritance Tax Act 1984 provides provisions specifically for Potentially Exempt Transfers (PETs). A PET is a transfer of value which is made during the lifetime of an individual; in other words, it is a gift of an asset and provided certain conditions are met, the PET can be exempt from IHT. The conditions which must be met are: The individual must have made the transfer on or after 18th March 1986. It must be a gift to another individual or to a specified trust. No benefit from the transfer must be retained. Individual must survive 7 years for the full value of the asset to fall completely out of the Estate for tax purposes. Where the death occurs after 3 years following when the transfer was made, taper relief applies and has the effect of reducing the tax liability on the transfer rather than the full…

Read More

Introduction to Guardianship

By | Guardianship, Inheritance, Intestacy, Legal, Uncategorized, Wills | No Comments

Appointment of Testamentary Guardians The appointment of testamentary guardians is rarely considered by parent, but it is highly desirable that they should consider who should look after their children if both were to lose their lives while their children are under eighteen. The appointment of a testamentary guardian can only be made by a person with parental responsibility. What is Parental Responsibility? The legal definition of Parental Responsibility is the rights, duties, powers, responsibilities and authority which by law a parent has in relation to their child and their property. This includes: Providing them with a home maintaining them Choices about their medical treatment How and where they are educated Deciding their name It does not include a duty to maintain the child financially, all parents have this duty regardless of whether they have parental responsibility. More than one person can have parental responsibility for the same child at the…

Read More

Flexible Life Interest Trust

By | Inheritance, Legal, Property, Trustees, Wills | One Comment

Flexible Life Interest Trust  Due to more complex estates and greater wealth, greater flexibility is essential to cope with any future changes to the family structure (such as new family members) and changes in the tax regime. The best way to gain the maximum flexibility is by the use of a Flexible Life Interest Trust (FLIT). How a FLIT works The residue of the estate is held on trust for the surviving spouse or civil partner for their lifetime, after which or when the life interest is ended, a discretionary trust will arise in favour of nominated beneficiaries, usually children and issue. Trustees are given a number of powers. They can grant the income of the trust fund to the surviving spouse/civil partner and have the power to grant the capital of the trust fund to them as either absolutely or as a loan, which would be repaid when the…

Read More