The following Private Client guidance note provides comprehensive and up to date legal information covering:
The transfer of value on death is one transfer affecting the whole estate. Where there are no contrary provisions in the deceased’s Will, the general principle is that the inheritance tax (IHT) due on all UK free (not settled) property which vests in the personal representatives (PRs) is part of the testamentary and administration expenses and therefore it is all payable from the residue. Conversely, IHT is generally borne by the recipient beneficiary or other parties on:
jointly owned property passing by survivorship
property subject to a gift with reservation of benefit
foreign situs property, and
property expressed in the Will as passing ‘subject to tax’
For further information on the allocation of the burden of IHT on death, including examples covering various scenarios, see Practice Note: Apportionment of IHT burden on death.
For a deceased estate where part of the residuary estate is exempt because it passes to a spouse or civil partner, charity, political party or other exempt body, special calculations are required to calculate the amount of IHT on any non-exempt tax-free legacies and non-exempt residue and its burden. This is known as grossing up.
Grossing up is sometimes required in relation to lifetime chargeable transfers where the donor also pays the IHT at the lifetime rate, so that the amount transferred needs
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