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I’m a little confused on this…The Scenario says:
Lebna has a chargeable estate valued at 980000. His rataye oil includes a main residence valued at 340000 on which there is an outstanding interest only mortgage of 152000. Under the terms of his will Lebna has left his entire estate to his son.
Q. If Lebna were to die today 1 March 2019, what is the total amount of residence nil rate band which will be available when calculating the IHT payablenon his chargeable estate?
A. 12500
B. 250000
C. 340000
D. 188000The answer given is D. 340000- 152000
I thought the residence Nil rate band was 125000. They asked for nil rate band. 188000 is the value of the estate after the mortgage is deducted and from which the nil rate band would be deducted to leave a chargeable amount of 63000. To my understanding at least. Please explain how this is the correct answer.
The other part of the scenario which is confusing is about the CLT and PET.
Lebna’s wife Lulu died on 24th of January 2015. She left an estate if 210000 for IHT purposes. There was no main residence. Under the terms of her will LuLu left a specific legacy of 40000 to her brother with the residue of her estate tobjeb husband. Lulu made the following lifetime transfers:13 February 2007 CLT 50000
21 June 2013 PET 80000Both transfers are after taking account of all available exemptions.
The nul rate band for the tax year 2014-15 is 325000Q. If Lebna were to die today 1 March 2019, how much of Lulu’s nil rate band will the personal representative of Lebna’s estate be able to claim when calculating the IHT payable on his chargeable estate?
A. 155000
B. 205000
C. 35000
D. 285000
The answer given is B. 325000-80000- -40000Why wasn’t the CLT also subtracted since it was made within 7 years of the PET which has now become chargeable?
Yes I have. Which is why I dont understand the answers . For the first question the residence nil rate band for 2018-19 tax year is 125000. If the value of the residence after the deduction of the interest is less than the nil rate band then the nil rate band is reduced to the value of the estate so how can the residence nil rate band be 188000 when that is more than the allowance of 125000?
For the second question I don’t get why the 7 years culmination period wasn’t used as the CLT was within 7 years of the PET which is chargeable on death.
Ok. I think I got it . The wife didnt have a main residence so her nil rate band was passed on. I got sidetracked because it says she had no main residence but she would still be entitled to the allowance which her husband can claim .
I’m still confused about the CLT part though. Was the culmination period not in effect for the 2017/18 tax year ?
Firstly, yes, the unused proportion of the unused residence nil rate band passes to the surviving spouse – here 100%
Secondly re the CLT – you say that you have worked through the notes and lectures – please refer to study notes chapter 24 section 9 and specifically example 2 that follows.
The PET was within 7 years of the date of the CLT – the CLT is NOT within 7 years of the date of deathNo – the only exempt legacies that would reduce the value of the chargeable estate are to spouses and civil partners – also in real life to charities
1 If Lebna were to die today, 1 March 2022, how much of Lulu’s nil rate band will the
personal representatives of Lebna’s estate be able to claim when calculating the IHT
payable on his chargeable estate?
A £155,000
B £205,000
C £35,000
D £285,000
I went throught chapter 24 chapter 9 example 2 but i still do not understand why
(13 February 2009 Chargeable lifetime transfer 50,000) this transfer is not deducted from nil rate band.kindly explain this to me.
Please let me know more about the question? I cannot help from the information provided.
Ch24 and Ch9 – are these in the latest version of the OT manual?2009 is more than 7 years before Lebna died so maybe that’s the reason it’s not dedcuted?
You should assume that today’s date is 1 March 2022.
Lebna and Lulu were a married couple, but, unfortunately, Lulu died on 24 January 2017.
Lulu
Lulu left an estate valued at £210,000 for inheritance tax (IHT) purposes. The estate did not
include a main residence. Under the terms of her will, Lulu left a specific legacy of £40,000 to
her brother, with the residue of the estate to her husband, Lebna. Lulu had made the
following lifetime transfers:
Date Type of transfer Amount
£
13 February 2009 Chargeable lifetime transfer 50,000
21 June 2015 Potentially exempt transfer 80,000
Both of these transfers are after taking account of all available exemptions.
The nil rate band for the tax year 2016/17 is £325,000.
Lebna’s chargeable estate
Lebna has a chargeable estate valued at £980,000. His estate includes a main residence
valued at £340,000 on which there is an outstanding interest?only mortgage of £152,000.
Under the terms of his will, Lebna has left his entire estate to his son.
Gift to son on 22 February 2017
On 22 February 2017, Lebna made a gift of 60,000 £1 ordinary shares in Blean Ltd, an
unquoted investment company, to his son. Before the transfer, Lebna owned all of Blean
Ltd’s share capital of 100,000 ordinary shares. The market value of Blean Ltd’s ordinary
shares on 22 February 2017 was as follows:
Holding Market value per share
40% £4.20
60% £6.30
100% £7.10
Lebna had not made any previous lifetime gifts.
Gifts to friends during October 2021
Lebna made cash gifts of £85, £225, £190 and £490 to various friends during October 2021.
The gifts of £85 and £190 were to the same friend.1 If Lebna were to die today, 1 March 2022, how much of Lulu’s nil rate band will the
personal representatives of Lebna’s estate be able to claim when calculating the IHT
payable on his chargeable estate?
A £155,000
B £205,000
C £35,000
D £285,000this is the updated question.
that is ok that it has been more than seven years but does the nil rate band of 325000 also gets renewed if it has been more than seven years of death to chargeable life time transfer of 50000 or did they not consider this band at the time and just paid 25% of amount in 2009
its in Kaplan and the answer is b and in the answers they did not deduct 50000 from the nil rate band I want to know the reason for that,
does the nil rate band gets renewed after 7 years its not like this in other questions.They do not dedcut the £50k as the gift took place more than 7 years before death in 2009.
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