IHT400 or IHT205 - disagree with solicitor

IHT400 or IHT205 - disagree with solicitor

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The solicitor for a client reckons form IHT205 should be completed, but I am not convinced that this estate is an excepted estate.

Husband dies with gross estate £390k, £384k net.  Of this £347k is left to a discretionary trust and £37k to the surviving spouse.  The £347k comes about because the will leaves the trustees a nil rate sum of the maximum that can be passed on without IHT becoming due.  This comprises £325k nil rate band plus £22k agricultural property relief.

I feel that the net qualifying value of the estate for the purposes of the excepted estate rules is £347k, not £325k and that consequently this is not an exempt excepted estate.  As no other heading of the excepted estate rules can apply, I consider that IHT400 is applicable even though there is no tax to pay ( agricultural relief being claimed on IHT414).

What do readers think?

Replies (5)

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By cohen
06th Oct 2015 21:04

Hi

I sgree with you, if the gross value of the estate is over the available NRBs.

IHT206 confirms the requirements: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/459094/150717_final_version_IHT206_2011_.pdf

(top right of page 4)

 

 

 

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By Andp
07th Oct 2015 12:49

I agree IHT400 on the basis .....

use common sense 

when a "trust" is used , 205 just aint an option 

the link cohen kindly found

sit back and think of the staff at HMRC Nottingham wading through 50 pages of IHT400 , when 48 pages could have been disclosed on the 8 page 205 lol. Their rules not ours.

 

 

 

 

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By dropoutguy
07th Oct 2015 14:25

I think that Reg 3(e) of the 2004 excepted estate Regs nails it.  If you apply that formula to this case, you get 347k.  That is over the IHT threshold ( £325k in this case ) and so IHT400 is needed.

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By Andrew_hound
15th Oct 2015 17:26

change the will!

NB comments are made before the new regulations came in!

I had an estate like that and, so that there was maximum flexibility going forward instructed a solicitor who did the necessary deed of appointment that brought the discretionary trust to an end in effect ab initio so that all went to the widow. 

 

I accept that this may not be beneficial in this case as the agricultural relief may get lost as a result but it may be worth considering (if not already done so)

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By dropoutguy
15th Oct 2015 19:54

Hi again

Agree that a s144 variation/appointment would be appropriate in some cases now we have the transferable NRB.  I still like discretionary will trusts in cases where I think there may well be a significant chance of residential care for the widow though.

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