inheritance tax

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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.
References in periodicals archive ?
According to the protocol, 25% of real estate taxation is designated for developing slums; whereas the other 25 % would be for developing various governorates.
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We have had a few years to get used to the "decoupling" of state estate taxes from the federal estate tax, (6) but many property owners (and some estate planners) are still shocked to learn that there may be a state estate tax assessed on their out-of-state real property even if the estate escapes federal estate taxation.
Estate taxation has figured in economic research in three different ways.
Rabkin and Johnson, Federal Income, Gift and Estate Taxation (New York, NY: Matthew Bender and Co.
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According to marketing and research organization Limra International, survivorship sales rose 19% in 2004, the fourth year that a 2001 law has been lowering estate tax rates and raising amounts of family assets exempt from estate taxation.
Several massive tomes that achieve varying degrees of success in their breadth of their coverage and quantity of detail now dominate the field of real estate taxation.
The authors regret the error and emphasize that they had no intention of getting into estate taxation issues related to CRTs in this article.
Some may want advisors with specific areas of expertise, such as income and estate taxation or disability and adverse situations.
As an introduction to the use of trusts in combination with flow-through entities, this chapter will be especially useful to those students taking a flow-through course prior to their estate taxation course.