Commentary

I4.151 Non-deductible liability to donee―the basic rules

IHT, trusts and estates

I4.151 Non-deductible liability to donee―the basic rules

Liability to donee and Phizackerley

I4.151 Non-deductible liability to donee―the basic rules

Liabilities are taken into account in determining the value of a transferor's estate (at any time) only to the extent that they are imposed by law or are incurred for a consideration in money or money's worth1 — see I3.231.

Accordingly, if someone executes a deed of covenant to pay a sum of money, the making of the covenant is not a transfer of value, although payment of the covenanted sum during the covenantor's life will be. If the covenantor dies and still has not paid the covenanted sum, his personal representatives will be under an obligation to pay it, but it will not be deductible for inheritance tax purposes (because it was not incurred

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