Inheritance Tax - large lifetime gifts and valuation of assets.

n-n

Hi all,

I am helping with an estate where everything is left to the surviving spouse, but there were large cash gifts within the last 7 years.  The level of cash gifts is over £650k and were made jointly with the spouse.  I believe that means that a) IHT400 is required as gifts exceed £150k b) There may be some IHT to pay by the recipients as the deceased's share of the gifts is potentially over £325k if it cannot be shown that enough of the cash gifts fell within gifts out of income c) The estate will not pay inheritance tax as it's all left to a spouse.

My question is: IHT400 and the related supplements ask for a lot of details on assets and their valuations.  But these are irrelevant in this case as there will be nothing to pay on the estate whatever it's worth, only (potentially) a small amount on the cash gifts, paid by the recipients.  There are property, shares, and antiques etc that were singly/jointly owned.  Does HMRC really still require all this irrelevant info in this sort of situation, which can't be that unusual?  Even if the schedules still need to be filled in, is it ok to just put approximate overall values?

Thanks

getmore4less

What's the time line of the gifts if more than one.

Why estimate what should be known data?

SeniorSam

The IHT will be calculated on the second death and each spouse has their own nil rate band allowance of £325,000 plus residential allowance of £175,000 each. So, after £1,000,000 IHT will be payable at 40%

Calculating the gifts in amounts and when made and bu whom is important. If you can list those, then members may be able to add some guidance concerning the 7 year rule and some gifts may be within the gifting allowances.

getmore4less

Note:

The full residential nil rate band is only available if there are qualifying assets and beneficiaries to make use of it.

There may be IHT on first death.

Keep_pedalling

SeniorSam said:

The IHT will be calculated on the second death and each spouse has their own nil rate band allowance of £325,000 plus residential allowance of £175,000 each. So, after £1,000,000 IHT will be payable at 40%

Calculating the gifts in amounts and when made and bu whom is important. If you can list those, then members may be able to add some guidance concerning the 7 year rule and some gifts may be within the gifting allowances.

I don’t think that is the case. The deceased has gifted in excess of their NRB to people other than their spouse so everything above that is subject to IHT although it maybe subject to taper relief as well.

I also don’t think the OP is correct about the IHT needing to be clawed back from the recipients either. There would appear to be ample assets remaining in the estate to pay the tax and it should be paid before the distribution of the remainder. It makes sense to do this as far as reducing the IHT liability of the survivors estate, which now only has an exemption of £675k.

n-n

getmore4less said:

What's the time line of the gifts if more than one.

Why estimate what should be known data?

The point of my question is that this isn't known data - it's to do with the values of property, antiques etc.  There isn't any IHT due on them because they're all going to the spouse, so it seems strange that they need to be itemised and valued (possibly by experts?) in IHT400 and the schedules even though it doesn't effect the IHT in any way.  This isn't that unusual a situation so I'm hoping someone knows how to deal with it.     

Keep_pedalling

n-n said:

getmore4less said:

What's the time line of the gifts if more than one.

Why estimate what should be known data?

The point of my question is that this isn't known data - it's to do with the values of property, antiques etc.  There isn't any IHT due on them because they're all going to the spouse, so it seems strange that they need to be itemised and valued (possibly by experts?) in IHT400 and the schedules even though it doesn't effect the IHT in any way.  This isn't that unusual a situation so I'm hoping someone knows how to deal with it.     

Any estate that goes to IHT 400 requires a large amount of detail to be provided a lot of which does not effect the amount of IHT that may need to be paid. Anything that is coved by spousal exemption does not need valued beyond a reasonable estimate and you would only ever be penalised by HMRC if you under estimate an asset that resulted in an underpayment of IHT. You also don’t need to value every item that makes up the the chattels (anything under £500 I would lump together).

it still might be worth getting anything the widow plans to sell properly valued to prevent it picking up a capital gain liability.

getmore4less

n-n said:

getmore4less said:

What's the time line of the gifts if more than one.

Why estimate what should be known data?

The point of my question is that this isn't known data - it's to do with the values of property, antiques etc.  There isn't any IHT due on them because they're all going to the spouse, so it seems strange that they need to be itemised and valued (possibly by experts?) in IHT400 and the schedules even though it doesn't effect the IHT in any way.  This isn't that unusual a situation so I'm hoping someone knows how to deal with it.     

One reason it to track items.

It gives HMRC a stake in the ground they can go back to to check the second death estate is not telling porkies(although the first could do that for some things).

Hubby dies and passes £1m to the widow she dies a few years later and the estate is only £400k HMRC might want to have a look at where its gone.