- February 13, 2020 at 8:24 pm
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?
The 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 80000
Both transfers are after taking account of all available exemptions.
The nul rate band for the tax year 2014-15 is 325000
Q. 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?
The answer given is B. 325000-80000- -40000
Why wasn’t the CLT also subtracted since it was made within 7 years of the PET which has now become chargeable?February 14, 2020 at 5:27 pm
Have you worked through the OT study notes and lectures?February 15, 2020 at 2:16 am
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.February 15, 2020 at 10:50 am
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 ?February 16, 2020 at 9:31 am
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 deathFebruary 25, 2020 at 10:21 am
Is legacy to brother deduct from value of estate?February 29, 2020 at 4:29 am
No – 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
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