I have an estate where a gift was made by the now deceased of her right under a life interest trust contained in her late husband’s Will, the property was sold in 2014 and she didn’t purchase a new property with the cash, the cash instead passed to her step sons (a PET?)

The estate is taxable with TNRB, NRB, TRNRB and RNRB available. My question is how do I calculate the IHT due on the gift and payable by the beneficiaries (the stepsons)?

I can of course work out the estate rate and then calculate that way but due to the other reliefs, wonder if this is the correct way to calculation. Any views appreciated. Thanks

Lee Hibell
Paul Robinson Solicitors LLP

Assuming the step sons received an immediate absolute interest, the release would now be a failed PET.

The NRB and TNRB (but not RNRB) would be first applicable to the failed PET so the trustees/step sons would only be liable to IHT if her “share” of the property released (plus any earlier failed PETs) were worth more than the NRB/TNRB at the date of the release. Any excess in value would be taxed at 40%.

The RNRB/TRNRB cannot be set against lifetime gifts, but it might be used here for the free estate (I forget exactly how the downsizing rules are applied in an IPDI situation).

Andrew Goodman
Osborne Clarke LLP