I have a client who is doing Dad’s probate and he called me to ask a Q and I don’t know the answer!
Estate is £700k. NRB allowance is £650k - his and late wife. His Will contains a gift to charity of £100,000 so chargeable would be £600k. So no need to claim RNRB
Does that make it an excepted estate (under IHT allowances) or not? Or do they have to fill in full IHT400 as the GROSS estate is over £650k
In other words do you start with total and then apply exemptions or start with non exempt amount before determining if excepted or not?
At the risk of sounding harsh, I would suggest if he wants the answer to this he pays someone to look at it if he can’t find the answer himself. Why do people think it’s okay to want something for nothing, especially on a £700k estate. And then if the free advice is wrong they can still sue you.
Hi Sara. I wasn’t going to advise him. He asked because he was a client of mine for Wills and thought I would know. I’ve already told him it’s not my speciality and suggested he go elsewhere.
But I would have liked to know just so I do. To further my knowledge. And rather than rely on Google I thought I’d ask here …
RNRB is automatic not optional: IHTM46004. Only TRNRB and downsizing allowance require a claim. See also IHTM46070.
To preserve RNRB, so that it transfers to a surviving spouse/civil partner, the first to die must either leave an estate which is entirely exempt e.g. gift to spouse or must not leaving any QRI to a non-exempt beneficiary (could be a NRB DT for children and surviving spouse). Even so as any chargeable estate attracts available NRB it will reduce or eliminate any TRNRB e.g. a pecuniary legacy of £100k or £325k to children or a DT as per above, and with any interest in a qualifying residence being left to the surviving spouse absolutely or for an IPDI with a QRI-friendly remainder.
The strategy may be reversed if either the deceased can claim TRNRB from a former spouse or the survivor can or both can. In that case the first to die will wish to maximise the value of a QRI left otherwise than to the survivor e.g. to children absolutely or on IPDI(s). The latter trust can often then be converted by means of CLTs (within owners’ available NRBs) into a DT of which the survivor is a beneficiary; or by PETs where the survivor is made the original remainderman to the prior IPDI(s) or is first appointed out of a DT temainder with the property or a share in it, in order to minimise loss of CGT PPRR.
How crucial that might be will depend on the survivor’s life expectancy, the likelihood of a sale in their lifetime, and the prospective future growth in value, but bearing in mind that the split interests will each enjoy a 15% valuation discount for CGT and (not being related property) for IHT. If the two interests are ever united in the survivor’s estate the discount for IHT will be lost (though for CGT there will be no downside if the property is owned until death—while current tax treatment lasts!).
This strategy may ensure that either the survivor will secure maximum personal RNRB (and TRNRB) or, with a DT, given the prospective size of the survivor’s estate, through avoiding taper or loss of RNRB altogether either by the trustees’ distributing the property interest to the survivor in the first case or retaining it until their death, as the case may be; depending on values and RPT charges with any DT. IHT risks of IPDI termination(s) on death(s) of owners can be insured by a life policy (or several) written on trusts outside the survivor’s estate, if only to compensate for the consequent loss of NRB to the IPDI owner’s estate.
I think I may have responded to the wrong query! I should have checked in with my COP-appointed deputy. Still, the curse of the freebie hunter strikes, to approvingly channel Sara in full on extermination mode.
Thanks Jack. Yes it was sort of related but not quite. I think I found my answer anyway that it’s an excepted estate because the net chargeable estate is less than the combined available IHT allowances. I saw a previous topic where you and Malcolm had discussed it
I always say I’m not qualified to answer it as I’m not an expert! But I like to know anyway
I am not disposed to be too sniffy about certifiably insane questions from parsimonious punters which are relayed to us on here by fellow professionals. We all have, or have had, to suffer thus at times.
It is after all instructive to know what implausible scenarios are currently deluding or being scurrilously pitched to the Great Unwashed.
When incorrigible cheapskates insinuate themselves on here in person I am usually only just seconds behind Sara Spencer in sinking my fangs into their hard-faced effrontery. However, I am unable to suggest any pre-emptive counteracting strategy that would not place an unfair burden on our administrators.
Thanks. Can you point me to that post please? This one suggests not - because to qualify for an excepted estate “the net qualifying value of the estate” must not exceed the IHT threshold", Excepted Estate?
The original question mentioned that the estate had a value of £700,000 so I have to assume that that was the gross value and as this exceeds £650,000 it cannot qualify as an accepted estate. The fact that £100,000 is given to charity does not change that position as far as I am aware.
I have seen the webpage that Patrick has taken an extract form and I think it is a misleading oversimplification of the rules. As ALane has pointed out the Regs define NQV as the Net estate less transfers to spouse/charity.
It is the same position as was the case under forms IHT205. As long as the amount in box K was less than the available NRB’s (including TNRB’s but not including any RNRB) the estate was excepted. Box K is after the deduction of spouse/charity exemption in Box J
