(1). Wong died on 4 January 2021. When his wife, Wing, died on 3 August 2016, her entire estate of £200,000 was left to Wong. However, Wing had made a gift of £100,000 to her daughter on 2 May 2016. This figure is after deducting available exemptions. The nil rate band for the tax year 2016–17 is £325,000.
Ignoring the residence nil rate band, how much nil rate band is available against Wong’s estate?
(2). On 22 May 2019, Winston made a gift of £4,400 to his son, and on 7 September 2020 he made a gift of £7,200 to his daughter.
What is the value of the PET made on 7 September 2020 by Winston to his daughter?
(3). On 12 June 2020, Arnold made a gift of £440,000 to a trust (this figure is after deducting available exemptions). Arnold will pay the IHT arising from the gift. He has not made any previous lifetime gifts.
What is Arnold’s lifetime IHT liability in respect of the gift of £440,000 to the trust?
(4). On 20 November 2020, Alex made a gift to a trust, and this resulted in a lifetime IHT liability of £46,000.
What is the due date for the IHT liability of £46,000?
A 30 April 2021
B 20 May 2021
C 31 May 2021
D 31 January 2021
The following scenario relates to questions 5-9.
You should assume that today’s date is 20 March 2021.
Min and Mon, a married couple, are respectively aged 76 and 70.
Min has a chargeable estate for IHT purposes valued at £850,000.
He owns two properties, respectively valued at £336,000 and £413,000. The first property has an outstanding repayment mortgage of £160,000, and the second property has an outstanding endowment mortgage of £84,000.
Min owes £18,400 in respect of a personal loan from a bank, and he has also verbally promised to pay legal fees of £4,200 incurred by his nephew. Min expects the cost of his funeral to be £5,400, and this cost will be covered by the £6,000 which he has invested in an individual savings account.
Under the terms of his will, Min has left all of his estate to his children (the residence nil rate band is not available).
On 22 August 2011, Min had made a gift of £110,000 to his daughter, and on 12 October 2020, he made a gift of £200,000 to his son. Both these figures are after deducting all available exemptions.
The nil rate band for the tax year 2011–12 is £325,000.
On 25 March 2021, Mon is planning to make a gift of 1,000 £1 ordinary shares in ACE Ltd, an unquoted investment company, to her son. Mon currently owns 5,500 shares out of ACE Ltd’s issued share capital of 10,000 £1 ordinary shares. ACE Ltd’s shares are worth £16 each for a holding of 10%, £21 each for a holding of 45%, and £36 each for a holding of 55%.
(5). What is the net value for the two properties, and related mortgages, which will have been included in the calculation of Min’s chargeable estate of £850,000?
(6). What is the total amount of deductions (ignoring mortgage debts) which will have been permitted in calculating Min’s chargeable estate of £850,000?
(7). What amount of IHT will be payable in respect of Min’s chargeable estate valued at £850,000 were he to die on 25 March 2021?
(8). What value will be transferred by Mon in respect of her gift of 1,000 £1 ordinary shares in ACE Ltd to her son?
(9). Why might it be beneficial for IHT purposes for Mon to skip a generation so that lifetime gifts are made to her grandchildren rather than to her children?
A To maximise the use of her nil rate band
B Because there is a greater chance of the gift becoming exempt
C To avoid a double charge to IHT
D Because it postpones the payment of the IHT liability