inheritance tax


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Related to inheritance tax: capital gains tax, gift tax, estate 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.
References in periodicals archive ?
In avoiding Inheritance Tax it may be advisable to reduce the value of your estate by giving some of your assets away while you are still alive.
Bryan Hoare, of Blackett Hart & Pratt, explained: "Although to a certain extent, we are in the hands of the Government as to how effective any Inheritance Tax planning may be, it is currently possible to mitigate your liability through a will trust.
North Carolina taxes gifts at the same rate as the inheritance tax, while Louisiana imposes gift tax rates from 2% to 3%.
Receipts for inheritance tax have been rising by about 8% each year since 2009/10 and currently over PS3billion in inheritance tax is paid to HMRC each year.
Inheritance tax is primarily levied on the value of the assets of someone who has died - but gifts made before death may also be liable.
Married couples and civil partners inherit their spouse's assets tax-free, as well as their unused inheritance tax allowance (providing the first to die didn't use any of it by giving money away).
The scope of inheritance tax is not confined to only death, it includes charges on lifetime transfers and on property held in, or leaving, certain trusts.
Money you are soon to inherit There are a number of ways to legally reduce, or possibly avoid, inheritance tax. There are certain annual gifting allowances, which in some circumstances can be significant if the right criteria are met.
Earlier this month, the Institute for Public Policy Research (IPPR) economic and social think-tank called for inheritance tax to be abolished when it published its "economic justice" report.
It is difficult to predict the outcome of the review but any restriction of APR and BPR is concerning because of the often high value of agricultural and business assets, and the possible level of Inheritance Tax payable if such assets do not qualify for relief.
Under Iran's previous inheritance tax, the rate was 5 percent on assets up to the equivalent of $1,400, if left to spouses and children, and then jumped to 51 percent for sums above that.