Sally, a UK citizen, died on 10 October 2020 leaving an estate made up as follows: Her main residence valued at £875,000. The property had a £525,000 mortgage secured on it. A Croatian holiday apartment valued at £160,000. Bank balances of £1,070,000. 8,000 shares in quoted company. The Stock Exchange Daily Official List (SEDOL) on the day of her death valued these as: 60p to 68p with marked bargains ranging between 58p to 68p. Sally had taken out a life insurance policy on her own life. The policy was written into trust for her daughters. Following her death, Sally’s two daughters received insurance proceeds of £95,000. Sally had contributed £50,000 into the policy during her lifetime and the policy’s value on the date of death was £90,000. The following debts and liabilities were owed by Sally on her death: Household utility bills, tax liabilities, etc. £19,000. Her funeral costs amounted to £8,460. Sally had made two lifetime transfers to individuals – the first on 3 September 2013 - £100,000 to her eldest daughter and on 3 December 2013 £100,000 to her youngest daughter. Sally was predeceased by her first husband, John, who died in 2010 John’s executors used 50% of John’s IHT nil rate band on his death estate. In her will Sally left her house, her Croatian apartment and £200,000 in cash to her second husband, Wayne. The remainder of her estate was left to her two daughters. Required(a) Calculate the value of Sally’s estate for IHT purposes and the amount of Inheritance Tax payable on the estate. b) State by whom and when the tax is payable and by whom it is borne.
Sally, a UK citizen, died on 10 October 2020 leaving an estate made up as follows:
Her main residence valued at £875,000. The property had a £525,000 mortgage secured on it.
A Croatian holiday apartment valued at £160,000.
Bank balances of £1,070,000.
8,000 shares in quoted company. The Stock Exchange Daily Official List (SEDOL) on the day of her death valued these as: 60p to 68p with marked bargains ranging between 58p to 68p.
Sally had taken out a life insurance policy on her own life. The policy was written into trust for her daughters. Following her death, Sally’s two daughters received insurance proceeds of £95,000. Sally had contributed £50,000 into the policy during her lifetime and the policy’s value on the date of death was £90,000.
The following debts and liabilities were owed by Sally on her death: Household utility bills, tax liabilities, etc. £19,000. Her funeral costs amounted to £8,460.
Sally had made two lifetime transfers to individuals – the first on 3 September 2013 - £100,000 to her eldest daughter and on 3 December 2013 £100,000 to her youngest daughter.
Sally was predeceased by her first husband, John, who died in 2010 John’s executors used 50% of John’s IHT nil rate band on his death estate.
In her will Sally left her house, her Croatian apartment and £200,000 in cash to her second husband, Wayne. The remainder of her estate was left to her two daughters.
Required(a) Calculate the value of Sally’s estate for IHT purposes and the amount of Inheritance Tax payable on the estate.
b) State by whom and when the tax is payable and by whom it is borne.
(c) Discuss the benefits of making lifetime transfers for IHT purposes and how such transfers can affect the tax on the estate at death
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