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Where Taxpayers and Advisers Meet

Form IHT205 Exemptions

Another1
Posts:32
Joined:Sun Apr 04, 2021 12:17 pm
Form IHT205 Exemptions

Postby Another1 » Sun Apr 04, 2021 12:22 pm

My wife and I have mirror wills with life interest trusts included which prevents all assets in spouses sole name passing to the survivor absolutely.The surviving spouse is a trustee along with two sons,with absolute control of the trust.


In completing Form IHT205 I would want to be able to include ALL deceased assets as Exemptions at Box J of this form(thus avoiding IHT) as stated in extract below...

‘In box J, enter the value of any exemption for assets passing on death to either:
• the surviving spouse or civil partner of the deceased.’
- ........

But the Will appears to not allow me to do this since the Will trust prevents assets passing to Survivor?!....

How is this contradiction overcome?.....would I include deceased assets here anyway,or should they be included elsewhere?

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Form IHT205 Exemptions

Postby maths » Sun Apr 04, 2021 5:30 pm

Spouses H and W each have identical wills under which the first spouse to die leaves their estate on trust granting the surviving spouse a life interest therein.
The assets left on trust are those assets of the deceased spouse which that spouse owns 100% at date of death. Any assets held jointly pass to the surviving spouse by way of survivorship ie these assets do not fall into the trust.

Assets passing by survivorship (ie inter-spouse transfers) are included in Box J.

Another1
Posts:32
Joined:Sun Apr 04, 2021 12:17 pm

Re: Form IHT205 Exemptions

Postby Another1 » Sun Apr 04, 2021 6:11 pm

Thanks....

The assets left on trust are those assets of the deceased spouse which that spouse owns 100% at date of death.
So can you confirm that the assets left on trust,in this instance, can be regarded as exempt from IHT and can be entered in Box J?

Another1
Posts:32
Joined:Sun Apr 04, 2021 12:17 pm

Re: Form IHT205 Exemptions

Postby Another1 » Sun Apr 04, 2021 7:20 pm

I had my doubts about IHT exemption position but the following para. has been taken from a follow up letter after the drawing up of the wills......which suggests tax exemption is not affected!...
This is why I am trying to obtain independent advice..

‘The life interest of the surviving spouse in both the house and other sole assets means the transfer on death qualifies for spouse exemption for inheritance tax purposes.The unused NRB and RNRB can be transferred to the survivors estate and upon their own death the trust assets will be included as part of their taxable estate.The inheritance tax position is therefore exactly the same as if the same assets had been left to the surviving spouse absolutely! ‘

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Form IHT205 Exemptions

Postby maths » Mon Apr 05, 2021 7:17 pm

Assets held jointly as beneficial joint tenants (ie passes by survivorship) are dealt with in IHT 205 Box 9.2.

Exemptions (inter-spouse transfers on death) are dealt with in Box J and include the value of the trust property in which the surviving spouse has the life interest.

The life interest of the surviving spouse will qualify what technically is referred to as an Immediate :Post Death Interest (IPDI); this means that the trust property was left by the deceased spouse to the surviving spouse and hence an exempt transfer because the surviving spouse is treated as beneficially entitled to the trust property even though he/she does not in fact own the property.

Another1
Posts:32
Joined:Sun Apr 04, 2021 12:17 pm

Re: Form IHT205 Exemptions

Postby Another1 » Mon Apr 05, 2021 10:15 pm

Many thanks.._

That clears up my mixed thoughts on the matter....

Would there be a need to add a note on the form,for these Exempt Sole Assets entered in Box J as assets held as an IPDI?


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