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IHT exit charge query

IHT exit charge and non relevant related settlements

On death in 2002, under the will, a NRBDT and IPDI for spouse were set up.  In 2012, the TYA charge based on market value of NRBDT and initial value of IPDI was calculated.  Under FA2015, you no longer include the initial value of IPDI in calculating any future TYA/exit charges.  In 2017, the surviving spouse dies and the trustees wish to wind the NRDBT.  Moving forward, I just wanted to check that you need to recalculate the effective IHT rate to ignore the inital value of IPDI and that you don't need to use the effective IHT rate at the TYA in 2012, which does include the initial value of the IPDI.

Thank you in advance. 

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19th Oct 2017 23:04

What happened on second death to the fund subject to the IIP? If that did not become RP, I think what you are saying is correct.

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20th Oct 2017 08:27

Having said that, and taking a step back... have you (previously) taken account of s80?

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20th Oct 2017 08:56

On death of the life tenant, the IPDI went to the remaindermen absolutely. No further RPT. s80 does not apply. So under the new FA(2) 2015, it reads to me that when calculating the exit charge after the 1st TYA, I can now ignore the initial value of IPDI, which would have been a related non-RPT. I now have to recalculate the new "effective" rate using the current NRB and ignore the inital value of IPDI. Do you agree?

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20th Oct 2017 09:40

I agree re FA(No 2) 2015, yes.

Why did s80 not apply in 2012?

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20th Oct 2017 09:53

The IPDI was still an IPDI in 2012. The life tenant did not die until 2017 and on the life tenant death the IPDI passed to the remaindermen absolutely. Isn't the s80 rule where there was an initial IPDI for the surviving spouse and then on death of the surviving spouse becomes a RPT eg. on discretionary trust for children and for the purpose of calculating the TYA of the former IPDI, now RPT, the date is based on the death of the first spouse death? I don't understand why it would apply in this situation as the IPDI never became RPT.

I am talking about calculating the exit charge for the separate NRBDT that was set up at the same time as the IPDI of the residual. eg. On death, set up NRBDT and the residual of estate for spouse for life, with remainder to children absolutely.

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20th Oct 2017 10:05

Just testing. I agree.

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