IHT pro-rata on amound received???

[jaconat]

Could someone please clarify the way in which Inheritance Tax is calculated.

The main beneficiary is to inherit 55% of the total funds (made up mainly from the sale of a property) and the rest is to be divided equally between four other beneficiaries. The interim accounts show inheritance tax calculated and paid from the *total* value of the estate. Then the main beneficiary has recieved the *full* proceeds from the sale of the property and the remaining funds have then been divided between the other beneficiaries.

This appears to be rather unfair since the amount of inheritance tax has not been pro-rata'd to the actual amount inherited. Should the beneficiaries pay an amount of tax proportionate to the sum they are inheriting?

Thanks

[kirstie.williamson@a]

Have you seen a copy of the will ?

The way the estate is divided will depend on what the will says.

If the primary beneficiary is to receive 55% of the gross estate ( ie free of tax) and the other beneficiaries a quarter each of the residue ( ie net estate - after payment of liabilities including IHT) then the result is as you have described. It is nothing to do with the way IHT is calculated - it is how the will was drafted and the testamentary intentions of the deceased.

Ask the solicitor for more clarification if the will is not explicit on this point.

KW

[bob.fraser@towrylaw.]

Sadly tax is not always (if ever) "fair"!
IHT is chargeable to the estate of the deceased, and paid from the estate's assets. It is not paid by the beneficiaries.
The aportionment of the assets will be determined by the wording of the will. If the will states that the main beneficiary is to get the value of the property, with any residual funds being distributed to other beneficiaries, then the effect is as you describe.
You should check if the will specifies that the main beneficiary will receive either a specified amount, or a specified asset.