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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…

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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…

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