IHT calculation

bring_back_threepenny_bit

I'm trying to help a relative who wants to get a ball-park grasp of the IHT liability on their Estate, so they can work out how much to leave in bequests and residual legacies, including to  charity. Ball-park figures are: Property and assets: 1,081,000; debts including funeral costs, 10000. (This includes Funeral costs, and Income Tax owed, leaving 1070000). They plan to leave a bequest of 25k to Charity, plus the residue (after other bequests) of 100,000. This is over 10% of the Estate so should attract IHT of 36%. They are unmarried with no children so Nil rate band is 325,000. I have worked this out to mean that 746000 is liable to tax, with a little over 268k to pay in IHT. Is this right? I'm not sure if the charitable bequest of 25k is also tax exempt, Or if I've missed anything vital.
Thanks!

Keep_pedalling

If only £100k is not going to charity then there will be no IHT, as all gifts to charities are exempt.

Linton

Keep_pedalling said:

If only £100k is not going to charity then there will be no IHT, as all gifts to charities are exempt.

I think we need clarification here as I took it as £25K + the residue to charity with the residue being £100K.  The whole estate being approx £1M.

bring_back_threepenny_bit

Yes, just to clarify, there is a gift of 25k to charity, plus the residue (expected to be 100k) also going to charity; total 125k. The other bequests are not to charity.
Thanks

jimbo6977

Residue to charity is a big no-no and will create chaos and heartache for the executors / administrator. The charity will be bound by charity law to nit pick over every last farthing so as to maximise their revenue and will be harder than nails in this regard, like a cross between a bulldozer and the Flying Squad. 

bring_back_threepenny_bit

Hi, thanks for the comments. A couple of points:
Is the 10% minimum that may be left to charity, calculated from the net estate after debts (just over 1M in this case), or is it 10% of the taxable estate, after the nil rate band has been deducted (just under 700k in this case)?
My relative may be persuaded to leave a fixed 10% percent to charity, to guarantee the lower IHT rate; I'm not sure if this would still lead to the type of problems described by jimbo?
Any comments on the overall calculation also welcome.
Many thanks.

Fly_Guy

Agreed regarding Jimbo's comments regarding leaving a residue to charity. They are absolutely appalling and will make the executors life a living hell for years.
I would suggest that your relative speak to his executors and check they would be willing to take on this onerous task - as its quite possible they would renounce once they found out otherwise.