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 ?
Assets can be passed between spouses free of inheritance tax, which can make an enormous difference to the tax due.
Alarmingly, despite more than a third of over-55s being concerned about paying inheritance tax on their estate, less than a fifth have actually taken action to reduce their potential tax bill.
Inheritance Tax is paid at 40% on a person's estate if it's worth more than PS325,000 when they die.
The level of receipts will also have been affected by the freeze in the inheritance tax Nil Rate Band, which has been held at PS325,000 since April 2009.
From a base of 17,000 estates paying inheritance tax upon the owner's death in 2010-11, the current freeze on the nil rate band could bring in an additional 5,000 estates per year who are liable to an inheritance tax bill.
If any of your readers have paid inheritance tax in Spain and were non-residents, we may be able to help them.
There are professionals who can offer expert guidance on inheritance tax and help people understand their exposure and the actions that could be taken to mitigate it.
The instructions to the inheritance tax return make it plain that not all not-for-profit organizations (for IRS purposes) are considered Class E beneficia-ries--for example, social clubs are not-for-profit organizations, yet they are not categorized as Class E beneficiaries (see the introduction to "Transfer Inheritance and Estate Tax," p.
He says there are a number of steps that you can take to reduce inheritance tax liabilities; you can give assets away or utilise trusts.
Annual gifts of up to PS3,000 per individual are completely ignored for Inheritance Tax purposes.
A If your mother's total estate (including the value of the house) is likely to exceed the inheritance tax threshold, then charging her a market rent may be an alternative to paying inheritance tax at 40% on any amount above the threshold.
Chancellor George Osborne has announced that government is to scrap its election pledge to reform the inheritance tax system and instead freeze the level at which it becomes payable at PS325,000 until at least 2019.