Question
How is the following assessed for IHT purposes?
My wife and I make a joint gift which is a PET. One of us dies within 7 years of us making the gift.Answer
Unless you’ve specified otherwise in writing the gift will be deemed to have been made 50/50.
The gift is initially classed as a potentially exempt transfer (PET), that is it falls outside of both your estate's provided you both live for 7 years. If either or both of you die within 7 years of making the gift then some or all of the gift will effectively remain in your respective estates.
Between years 3 and 7 of making the gift any inheritance tax (IHT) due on the gift is reduced by a 'taper relief', starting at 20% in year 3-4 and rising to 80% in year 6-7.
However, the key thing to remember about PETs is that on death they're the first assets to be offset against the (IHT) nil rate band, currently £325,000. So if the gift(s) total less than £325,000 each then it's unlikely the taper relief offered by PETs will be of any benefit. Other assets that might have otherwise fallen into the nil rate band could instead be pushed above it and taxed at 40% - although spouses can pass assets between each other without any IHT liability.
How is the following assessed for IHT purposes?
My wife and I make a joint gift which is a PET. One of us dies within 7 years of us making the gift.Answer
Unless you’ve specified otherwise in writing the gift will be deemed to have been made 50/50.
The gift is initially classed as a potentially exempt transfer (PET), that is it falls outside of both your estate's provided you both live for 7 years. If either or both of you die within 7 years of making the gift then some or all of the gift will effectively remain in your respective estates.
Between years 3 and 7 of making the gift any inheritance tax (IHT) due on the gift is reduced by a 'taper relief', starting at 20% in year 3-4 and rising to 80% in year 6-7.
However, the key thing to remember about PETs is that on death they're the first assets to be offset against the (IHT) nil rate band, currently £325,000. So if the gift(s) total less than £325,000 each then it's unlikely the taper relief offered by PETs will be of any benefit. Other assets that might have otherwise fallen into the nil rate band could instead be pushed above it and taxed at 40% - although spouses can pass assets between each other without any IHT liability.
Read this Q and A at http://www.candidmoney.com/askjustin/845/inheritance-tax-position-on-joint-gift
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