BR Guide Second Edition

SCENARIO: Vera is a widow aged 83. She has inherited her deceased husband’s full NRB and RNRB. BR AND GIFTS Vera combines gifting and BR strategies: £325,000 SHE GIFTS £325,000 FROM HER INVESTABLE ASSETS TO HER FAMILY £475,000 SHE INVESTS £475,000 INTO A BR ESTATE PLANNING SERVICE Gifts are made only three years before her death, so are failed PETs; but Vera has made no prior transfer in the seven years preceding the date of the gift and its value falls within the NRB so there is no further IHT due on the gift. £1 million HOME £975.000 INVESTMENTS & OTHER ASSETS THAT DON’T QUALIFY FOR BR VERA’S ESTATE: £1.975 MILLION With no IHT planning With a BR based estate planning service & gifting PROPERTY £1,000,000 £1,000,000 OTHER ASSETS £975,000 £975,000 TOTAL ESTATE £1,975,000 £1,975,000 BR INVESTMENT £0 £475,000 NIL RATE BAND £650,000 £650,000 GIFTS USING NRB £0 £325,000 GIFT ALLOWANCE AVAILABLE £6,000 (unused) £6,000 CASH SPENT BEFORE DEATH £75,000 £75,000 REMAINING NRB £650,000 £331,000 RESIDENCE NIL RATE BAND (2020/21) £350,000 £350,000 TOTAL ALLOWANCE £1,000,000 £681,000 IHT FREE ASSETS £0 £475,000 TAXABLE ESTATE £900,000 £419,000 IHT PAYABLE £360,000 £167,600 RESIDUAL ESTATE £1,540,000 £1,407,400 IHT SAVING £0 £192,400 PLANNING SUMMARY THE INVESTMENT FALLS OUTSIDE SCOPE OF IHT AFTER 2 YEARS GIVING £190,000 IHT SAVING £190,000 CASE STUDY 8 55 CASE STUDIES VERA’S ESTATE ON DEATH: £1,575,000 £1 million HOME £475,000 BR QUALIFYING ASSETS (BENEFITING FROM 100% IHT RELIEF) £175,000 RNRB TRANSFER AVAILABLE (100% of her husband’s unused RNRB - he died in 2016, and if the person died before 6 April 2017, the unused RNRB threshold and total available RNRB threshold are both deemed to be £100,000 so the unused percentage is 100%.) 100% is applied to the RNRB threshold at the death of the second spouse: 100% x £175,000. VERA SPENDS £75,000 BEFORE HER DEATH IN 2021 (BEFORE 5 APRIL) TAXABLE ESTATE: Estate value (£1,575,000) - total RNRB (£350,000) = £1,225,000 - total NRB (£331,000) = £894,000 - BR qualifying investments (£474,000) = £419,000 taxable estate Vera has left her home in her will to her direct descendants and can access RNRB. £650,000 of NRB available (Vera and husband) is reduced by £319,000 to £331,000 (after the value of the failed PET: less the year of the gift and the previous year’s annual gift allowance of £6,000) is offset against the value of the PET. £100,000 REMAINING ASSETS