Do i pay the charities before taking expenses out of estate

Cazzaloulou68

thanks @Keep_pedalling that’s what i thought. I’ll just reply and tell them i disagree with their calculations and will stick with my figures. Thank you for confirming I’m not going potty!

TW1234

I have some queries arising from this thread.and would be interested to know if my thinking is wrong.

 

It is implied that administration costs, such as estate agents & solicitors fees can be deducted from the gross estate when calculating IHt and the charity bequest. I thought that only debts existing at the time of death were relevant in determining the net value.

Having calculated that net  value, in the case given, then 10% of it becomes a specific amount bequeathed to the charities. It would be treated like any other specific bequests. The administration costs would come, effectively, from any amount available to the residual beneficiary.

The calculation of IHT due, would be based on the net estate plus any gifts with reservation or failed PETs.

The % rate  used for that calculation would be 40%, unless the charity bequest was 10% (or more) of the amount on which IHT was due. It would be 36%.if that 10% figure was met. The amount on which IHT is due is before any exemptions or allowances claimable are applied...

For this reason, it cannot be assumed that 10% is always the appropriate  % to bequeath to charity..

It is easy to confuse the two different relevant  aspects of 10%.

It would be possible for 10% of the net estate to be far lower than 10% of the value of the estate for calculation of IHT.

Consider the case of  a deathbed failed PET used as an attempt to reduce the IHT % rate payable!.

Keep_pedalling

TW1234 said:

I have some queries arising from this thread.and would be interested to know if my thinking is wrong.

 

It is implied that administration costs, such as estate agents & solicitors fees can be deducted from the gross estate when calculating IHt and the charity bequest. I thought that only debts existing at the time of death were relevant in determining the net value.

You cannot deduct any expenses other than funeral costs and pre-death debts to arrive at the net value. Anything else comes out of the residual estate 

Having calculated that net  value, in the case given, then 10% of it becomes a specific amount bequeathed to the charities. It would be treated like any other specific bequests. The administration costs would come, effectively, from any amount available to the residual beneficiary.

The calculation of IHT due, would be based on the net estate plus any gifts with reservation or failed PETs.

The % rate  used for that calculation would be 40%, unless the charity bequest was 10% (or more) of the amount on which IHT was due. It would be 36%.if that 10% figure was met. The amount on which IHT is due is before any exemptions or allowances claimable are applied...

For this reason, it cannot be assumed that 10% is always the appropriate  % to bequeath to charity..

It is easy to confuse the two different relevant  aspects of 10%.

It would be possible for 10% of the net estate to be far lower than 10% of the value of the estate for calculation of IHT.

Consider the case of  a deathbed failed PET used as an attempt to reduce the IHT % rate payable!.

Great post, it is as you point out a lot more complicated when you add things like failed PETs into the equation 

There is a calculator to that works out the amount that needs to be left to a charity to gain the reduced IHT rate. 

https://www.tax.service.gov.uk/guidance/work-out-if-Inheritance-Tax-qualifies-for-reduced-rate/question/calculate