How to value the Estate

13

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  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    Yorkshireman99 wrote: »
    Thank you! I have had a look at a number of sites and again the answers are conflicting. Apologies to the OP for interrupting their thread. I suppose it illustrates the fairly blunt way IHT applies with rather than it being progressive particularly those with no children. Ce la vie!


    Link to two you think are conflicting, it may be your interpretation of what they say is wrong.
  • Asher
    Asher Posts: 150 Forumite
    Yorkshireman99 wrote: »
    Thank you! I have had a look at a number of sites and again the answers are conflicting. Apologies to the OP for interrupting their thread. I suppose it illustrates the fairly blunt way IHT applies with rather than it being progressive particularly those with no children. Ce la vie!

    I don't mind I am learning a lot from the back and forth posting.
  • Yorkshireman99
    Yorkshireman99 Posts: 5,470 Forumite
    getmore4less wrote: »
    Link to two you think are conflicting, it may be your interpretation of what they say is wrong.
    Than you and thanks to the OP for their forbearance. What would really help me is two worked examples. For the sake of argument please use these hypothetical figures.


    A had net estate of £500,000. In January 2014 they gift £106,000 to a B, a friend. They have made no other significant gifts before and so are eligible for two year £3,000 allowances. Hence the AIUI the PET is £100,000. If A dies in July 2017 and has a net estate of £450,000. What IHT is payable and by whom?


    Second scenario.


    A survives until 2021 and leaves estate valued at £500,000. I assume that the gift no longer get added bck to the estate value and IHT is payable on the excess above £325,000 with the gift recipient paying nothing? TIA
  • Keep_pedalling
    Keep_pedalling Posts: 16,614 Forumite
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    Yorkshireman99 wrote: »
    Than you and thanks to the OP for their forbearance. What would really help me is two worked examples. For the sake of argument please use these hypothetical figures.


    A had net estate of £500,000. In January 2014 they gift £106,000 to a B, a friend. They have made no other significant gifts before and so are eligible for two year £3,000 allowances. Hence the AIUI the PET is £100,000. If A dies in July 2017 and has a net estate of £450,000. What IHT is payable and by whom?

    That would depend on their marital status, and if they owned a home they leave to children or not. If single or divorced with no property to leave to children, then 40% of £125,000 assuming your net figure includes the £100k gift

    Second scenario.


    A survives until 2021 and leaves estate valued at £500,000. I assume that the gift no longer get added bck to the estate value and IHT is payable on the excess above £325,000 with the gift recipient paying nothing? TIA

    Again depends on marital status etc.
  • Yorkshireman99
    Yorkshireman99 Posts: 5,470 Forumite
    edited 7 July 2017 at 10:08PM
    If I have understood you correctly. Unmarried and no children.


    At DOD estate is £500,000 in 2017 with gift of £106,000 made in Jan 2014. So is the IHT calculated on £500,000 plus £100,000?



    Secenario 2



    Estate at DOD in 2021 is £500,000 but gift not added back so IHT calculated on £500,000. TIA
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    edited 8 July 2017 at 6:30AM
    Yorkshireman99 wrote: »
    Than you and thanks to the OP for their forbearance. What would really help me is two worked examples. For the sake of argument please use these hypothetical figures.


    A had net estate of £500,000. In January 2014 they gift £106,000 to a B, a friend. They have made no other significant gifts before and so are eligible for two year £3,000 allowances. Hence the AIUI the PET is £100,000. If A dies in July 2017 and has a net estate of £450,000. What IHT is payable and by whom?

    you start with the failed PET that uses up £100k of nil rate band leaving £225 of the deceased own nil rate band

    then you add, RNRB if applicable, transferable nil rate band(s) if applicable.

    Of the £450k there may be exempt legacies like to a spouse or charity they come off the total, then you use up the nil rate band.
    anything left is Taxable by the estate.


    Second scenario.


    A survives until 2021 and leaves estate valued at £500,000. I assume that the gift no longer get added bck to the estate value and IHT is payable on the excess above £325,000 with the gift recipient paying nothing? TIA

    if the PET does not fail you miss of the first bit using up nil rate band.


    these are really basic examples still think you would be better off picking 2 of the ones you think are conflicting and getting someone to explain them.

    a lot of older examples will now be wrong as they won't include the RNRB.

    the adding gifts back into the estate can be confusing because you calculate the tax on the gifts separately and that is paid by the gift not the estate. and get taken off the total(if you use the add back method) far better to just use the use up the nil rate band method.
  • Yorkshireman99
    Yorkshireman99 Posts: 5,470 Forumite
    The problem is that all the examples I have seen complicate matters with ifs, ands, buts and maybes! The examples I gave are a real world situation that I have been discussing with someone. I just want a straightforward answer to the exact question asked. If that would not be too much trouble please could you tell me? Thanks.
  • getmore4less
    getmore4less Posts: 46,882 Forumite
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    Yorkshireman99 wrote: »
    The problem is that all the examples I have seen complicate matters with ifs, ands, buts and maybes! The examples I gave are a real world situation that I have been discussing with someone. I just want a straightforward answer to the exact question asked. If that would not be too much trouble please could you tell me? Thanks.

    Done that already.
  • Yorkshireman99
    Yorkshireman99 Posts: 5,470 Forumite
    getmore4less wrote: »
    Done that already.
    Thank you for being your usual helpful approach.
  • Keep_pedalling
    Keep_pedalling Posts: 16,614 Forumite
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    getmore4less wrote: »
    Adding gifts back into the estate can be confusing because you calculate the tax on the gifts separately and that is paid by the gift not the estate. and get taken off the total(if you use the add back method) far better to just use the use up the nil rate band method.

    Good point. If the receiver of the gift is also the regularly beneficiary then the effect is the same, but if you want to give someone else a gift and want to ensure they don't pay tax on it you need to do one of two things, either set up a term insurence policy that will cover the IHT on the gift (made in trust to the person receiving the gift) or you amend your will to leave them an additional legacy equal to any IHT payable on that at time of death.

    The term life policy is a good way of covering IHT for PETs given to residuary beneficiaries as well,
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