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Where Taxpayers and Advisers Meet

IHT Distribution

Jason123456
Posts: 56
Joined: Wed Oct 11, 2017 1:53 pm

IHT Distribution

Postby Jason123456 » Thu Aug 15, 2019 4:25 pm

If the residue estate(ignoring residence,for purpose of this enquiry) of a widow is E1000k, with £650k exempt from IHT and the residue is divided among 6 Benificiaries as follows:
£300k to A
£300k to B
£100k to each of C,D,E and F
how is the £350k of IHT which will be due is paid/shared/divided by the six Benificiaries?....are the proportions paid by each based on value of inheritance received....ie A would pay 300/1000..x£350k.,C = 100/1000...x£350k,.......

Lee Young
Posts: 2668
Joined: Wed Aug 06, 2008 3:26 pm
Contact:

Re: IHT Distribution

Postby Lee Young » Thu Aug 15, 2019 4:31 pm

An unhelpful reply, but it depends on how the estate is divided up and the way the will is worded. If any of the git amounts are fixed gifts, are the gifts "subject to" or "free of" inheritance tax? If the amounts you quote are how the residue would be split then the IHT would be proportionately split the same way also. In effect the residuary beneficiaries get the estate after tax has been paid.
Lee Young
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner


Partner, Frettens LLP
lyoung@frettens.co.uk
01202 491701

Jason123456
Posts: 56
Joined: Wed Oct 11, 2017 1:53 pm

Re: IHT Distribution

Postby Jason123456 » Thu Aug 15, 2019 4:34 pm

An unhelpful reply, but it depends on how the estate is divided up and the way the will is worded. If any of the git amounts are fixed gifts, are the gifts "subject to" or "free of" inheritance tax? If the amounts you quote are how the residue would be split then the IHT would be proportionately split the same way also. In effect the residuary beneficiaries get the estate after tax has been paid.
But the tax is paid by the residuary Benificiaries,...is that correct?..and not the estate?

Lee Young
Posts: 2668
Joined: Wed Aug 06, 2008 3:26 pm
Contact:

Re: IHT Distribution

Postby Lee Young » Thu Aug 15, 2019 4:38 pm

it is paid by the executors out of the estate, and (generally) out of the residuary beneficiaries' share of the estate.
Lee Young
Solicitor, Chartered Tax Adviser and Trust and Estate Practitioner


Partner, Frettens LLP
lyoung@frettens.co.uk
01202 491701

Jason123456
Posts: 56
Joined: Wed Oct 11, 2017 1:53 pm

Re: IHT Distribution

Postby Jason123456 » Thu Aug 15, 2019 4:47 pm

Thank you,...that also helps in my understanding on who pays IHT due, and I thought it was the Benificiary having to find funds before being able to inherit.

Jason123456
Posts: 56
Joined: Wed Oct 11, 2017 1:53 pm

Re: IHT Distribution

Postby Jason123456 » Thu Aug 15, 2019 5:26 pm

My original query was to try and assess how much each Benificiary would need to find to pay IHT,....but from what you say they would not have to worry because the accumulated/total IHT comes from the estate

Jason123456
Posts: 56
Joined: Wed Oct 11, 2017 1:53 pm

Re: IHT Distribution

Postby Jason123456 » Thu Aug 15, 2019 5:34 pm

My original query was to try and assess how much each Benificiary would need to find to pay IHT,....but from what you say they would not have to worry because the accumulated/total IHT comes from the estate
Does it also apply to PET’s if death within the 7years, with IHT to pay?

maths
Posts: 7600
Joined: Wed Aug 06, 2008 3:25 pm

Re: IHT Distribution

Postby maths » Thu Aug 15, 2019 7:44 pm

The primary liability to IHT (if any, as the nil rate band, for example, may apply) on a PET falls on the donee (ie recipient of the gift).

Jason123456
Posts: 56
Joined: Wed Oct 11, 2017 1:53 pm

Re: IHT Distribution

Postby Jason123456 » Fri Aug 16, 2019 9:09 am

The primary liability to IHT (if any, as the nil rate band, for example, may apply) on a PET falls on the donee (ie recipient of the gift).
So that is different from previous situation?.....referred to by Lee/

AGoodman
Posts: 888
Joined: Fri May 16, 2014 3:47 pm

Re: IHT Distribution

Postby AGoodman » Fri Aug 16, 2019 10:04 am

The executors pay the IHT on the estate, the donees pay IHT on lifetime gifts they have received.

BUT donees rarely pay IHT in practice because the nil rate band is allocated to lifetime gifts first. Donees could only end up paying IHT if the aggregate gifts made in the seven years prior to death exceed the nil rate band.


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