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LPC Law Notes Private Client Notes

Taxation Of An Estate Notes

Updated Taxation Of An Estate Notes

Private Client Notes

Private Client

Approximately 235 pages

A collection of the best LPC Private Client the director of Oxbridge Notes (an Oxford law graduate) could find after combing through twenty-nine LPC samples from outstanding students with the highest results in England and carefully evaluating each on accuracy, formatting, logical structure, spelling/grammar, conciseness and "wow-factor".

In short these are what we believe to be the strongest set of Private Client notes available in the UK this year. This collection of notes is fully updated f...

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Taxation of an estate 1) Calculate the cumulative total 1) Total of Chargeable transfers PETs Refer to Dates grid! Transfer was within 7 years of death of transferor * This is a failed PET, it becomes chargeable and will affect cumulative total * April 2007 - PS20,000 Transfer was over 7 years of death of transferor * This PET was successful and therefore does not contribute to cumulative total * April 2007 - PS0 LCTs Transfer was within 7 years of death of transferor * This is a chargeable transfer and will affect the cumulative total Cumulative total April 2008 - PS50,000 Tax payable on date of transfer on amount over the nil rate band * 20% Recalculation of tax rate on death * 40% Transfer was over 7 years of death of transferor * This is a chargeable transfer and will affect the cumulative total Cumulative total April 2008 - PS50,000 Tax payable on date of transfer on the amount over the nil rate band * 20% 2) Less lifetime exemptions 1) Family maintenance - s.11 IHTA 1984 * Made in favour of a child for their maintenance, education or training 2) Spousal exemption - s.18 IHTA 1984 * Gift can be conditional as long as condition is satisfied within 12 months 3) Annual exemption - s.19 IHTA 1984 * PS3000 exemption on chargeable transfers (LCTs or failed PETs) * Can apply 2 years of annual exemption - the current year and then the previous year (total of PS6000) Spousal exemption does apply to: a) All life interest trusts created on death where the spouse is the life tenant; and b) Life interest trusts, created during life, before 22nd March 2006, where the spouse is the life tenant c) Absolute transfers between spouses / civil partners Spousal exemption does NOT apply to: a) Life interest trusts where the spouse is in remainder; and b) Life interest trusts, created during life, created on or after 22nd March 2006 where the spouse is the life tenant 4) Small gifts - s.20 IHTA 1984 * Applies to gifts of value up to PS250 made to any person or to multiple people * Cannot be used in conjunction with the annual exemption 5) Normal expenditure out of income - s.21 IHTA 1984 6) Gifts in consideration of marriage and civil partnership - s.22 IHTA 1984 * Applies to each donor, not donee, so cannot double up (PS5000 + PS1000) * Can be used in conjunction with annual exemption * Amounts: a) PS5000 if made by a parent of a party to the marriage / civil partnership b) PS2,500 if made by a remoter ancestor of one of the parties (e.g straight line up family a? grandparent, great grandparent) c) PS1,000 in any other case (e.g. to nephew, niece, or family friend) 7) Charity exemption - s.23 IHTA 1984 * All transfers to charity are completely exempt * Must be immediate and not in remainder * Gift can be conditional as long as condition is satisfied within 12 months 8) Business property relief - s.103-114 IHTA 1984 Available where a business / business property has been owned for 2 years or more prior to the transfer (or where a spouse inherits this property under a will and it has been owned for any period before transfer) at the following rates: 100% a) For transfer of a business or interest in a business (e.g. business of a sole proprietor or a partner's interest in a business); or b) For transfer of shares in an unquoted company 50% a) Shares in a quoted company which gave the transferor control of the company; or b)Transfer of land, buildings, plant or machinery used for the purpose of a business carried on by either: 1) A company (quoted or unquoted) of which the transferor has control; or 2) By a partnership of which the transferor was a partner 9) Agricultural property relief - s.115-124 IHTA 1984 Available in respect of the transfer of agricultural property, including land, pasture and agricultural buildings which has been: a) Occupied by the transferor for agricultural purposes for 2 years or more prior to the transfer; or b) Owned by the transferor throughout the 7 years immediately before the transfer and it was occupied by someone for agricultural for those 7 years 100% a) Where the transferor was the owner or tenant in possession; or b) The transfer has the right to obtain vacant possession within 12 months; or c) The transfer is after 1 September 1995, and none of the above can be satisfied because of a new tenancy (lease) granted on or after 1 September 1995 50% All other qualifying agricultural property 2) Identify the taxable death estate General rule All assets the deceased was beneficially entitled to at death are included in the estate for IHT Property not included in the estate for IHT 1) Excluded property a) Property situated outside the UK where the person beneficially entitled to it is domiciled outside the UK b) Property where the deceased is a Remainderman and on their death the life tenant is still alive and receiving income The property has not vested and will therefore not be included 2) Insurance policies a) Simple life insurance policy Will pass into estate for IHT b) Insurance policy written in trust Where the benefit of the policy is written in trust for another, the proceeds will not pass into the estate for IHT 3) Pension scheme benefits a) Non-discretionary pension Will pass into estate for IHT b) Discretionary pension scheme If the contributor nominates the trustees to discretionarily pay the benefit of the pension to third party on the contributor's death the proceeds will not pass into the estate for IHT

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