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Melvin died on 6 March 2020 leaving an estate worth £2,000,000. His estate included a holiday home in the UK worth £400,0000 which he left to his sister. He left the rest of his estate to his daughter and appointed a friend to act as executor.
For each of the following individuals, select weather they will pay IHT due on estate, suffer the IHT payable on estate, or neither
Sister – why is she neither pays nor suffers tax?
holiday home £400,000
less NBR (£325,000)
for the remaining £75,000 there should be paid 40% IHT which means the sister suffers the tax. Not sure what am I missing here as the answer specifies that the sister neither pays nor suffer the taxDaughter – this is clear that she suffers tax
Executor – this is clear that he pays taxNot convinced you have read the OT Notes or watched the lectures – see OT Notes bottom of p.128. The executors / personal representatives pay the IHT out of the estate, but where there is a residuary legatee – the individual who receives the balance of the estate AFTER the any specific legacies have been paid out – it is that residuary legatee – the daughter in this case who suffers the full IHT cost on the death estate,
The specific legatee (the sister) gets the full benefit of what is bequeathed to them without any tax liability!
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