IHT on devise where residuary beneficiaries include charities


(G Wakeley) #1

I am acting in a taxable estate with mixed exempt and non-exempt residuary beneficiaries. There is a specific gift of property which is free of tax under the Will.

I would be grateful for any input on whether the tax on the specific gift will be paid by the estate before division, therefore effecting all residuary shares, including those of exempt beneficiaries.


(Carly Russell) #2

Hello, I have handled a contentious estate that addressed this particular issue. The approach to take could possibly depend on who are the non-exempt beneficiaries. If they are charities consider the rules in Re Ratcliffe and Re Benham. It will also depend upon the drafting of the Will. For example, is the residuary estate being held on trust after the payment of all legacies, liabilities and tax? There is a very good guide note on PLC.

I hope that this helps.

Carly


(Sedelstyn) #3

I have also had this issue crop up where some of the residuary beneficiaries were charities and they did not pay the inheritance tax attributable to the specific gifts. It was pointed out to me by the charities themselves. I had to recalculate and the non-exempt residuary beneficiaries had to bear the tax. There is a form to help you gross up and work the tax out on HMRC website. I must say I didn’t realise this and had all the residuary beneficiaries been charities I believe they would have had to pay the tax on the gifts even though they are exempt.