inheritance tax

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Related to Death duties: inheritance tax

inheritance tax

broadly, a tax on wealth transfers i.e. gifts made in lifetime or on death. The main charge is on everything beneficially owned at death, including property in which the deceased had an INTEREST IN POSSESSION. To prevent deathbed gifts being used to avoid the tax, gifts made within seven years of death are also charged but are POTENTIALLY EXEMPT TRANSFERs (PET) in the meantime. However, some lifetime gifts are immediately chargeable if the assets are transferred into certain types of discretionary trust. Whilst within such trusts and on exiting them, the assets are liable to a special regime of inheritance tax. The territorial scope of the tax is determined by the domicile of the individual. Those who are domiciled in the UK are chargeable on their worldwide assets and those who are not on assets situated in the UK. The value chargeable may be reduced by AGRICULTURAL PROPERTY RELIEF or BUSINESS PROPERTY RELIEF. Exemptions can apply for small gifts, maintenance payments, wedding gifts, gifts to charities and national museums and certain other bodies. Some of these exemptions have monetary limits. There is a taxable threshold below which the rate is zero. Earlier gifts obtain the benefit of this threshold before later gifts. In determining the tax on the assets held at death, a deduction is allowed for funeral expenses and debts outstanding, including any unpaid taxes. The primary responsibility for paying the tax relating to a lifetime gift which has become chargeable falls upon the recipient. Tax payable on the estate of the deceased is primarily payable by the executors, except to the extent of any tax relating to property held in a trust in which the deceased had an interest in possession, which is payable from the assets of that trust. It is possible to vary an inheritance after the death if all the beneficiaries who would inherit less as a result of the change so agree. This can result in significant reductions in the inheritance tax liability. However, the variation must be made within two years of the death and the instrument of variation must state that it is to take effect for inheritance tax purposes. Any inheritance tax is calculated as if the variation was effectively backdated to the date of death. A similar provision can be applied for CAPITAL GAINS TAX.
Collins Dictionary of Law © W.J. Stewart, 2006
References in periodicals archive ?
The items were displayed and money made from exhibitions helped pay some of Lord Carnarvon's death duties.
This procedure may appear to be defective because of measures often taken to avoid liability for death duties. However, the most common forms of avoidance achieve their objective of reducing the amount of tax paid, but do not reduce the final wealth estimates.
The Halifax bank says pounds 430,000 would be a fairer threshold for death duties but it isn't just about the taxing point, there's the iniquitous 40 per cent rate, too.
The ongoing sale of heirlooms by the Prince's elder son the Duke of Gloucester is to pay for deferred death duties and raised an amazing pounds 3MILLION with 300 lots still to go.
The reason for this is so that I do not have to pay death duties on them when I die.
1894: Death duties were introduced in Britan, now known as inheritance tax.
The minted moggie was ordered to pay pounds 500 in death duties.
He sold his castle after his first marriage broke up in 1983 and was made bankrupt 10 years later over death duties. He then sold 400 acres of land for PS2.1million.
The most wealthy in society manipulate death duty loop holes to avoid paying any death duties.
In February 2002 they gifted the property to a family trust in order to sidestep death duties.
The arrangement is frequently used to minimise death duties for children when they inherit their parents' estate.
In a three-part series, Death Duties, which starts tomorrow, she details how she solves crimes by examining her silent witnesses.