Tuesday, 27 December 2011

Have it your way with inheritance tax where asset values go up or down between gift and death!

If inheritance tax is due on the death of the donor because the gift was made to you within 7 years prior to the death, you can make a claim to ensure that the tax you pay is based on the value of the gift on death as opposed to the value at the date of the gift, provided the asset has fallen in value between the gift date and the donor's death date. This works well with property and cash.

However, extra care needs to be taken with assets which are valued differently for inheritance tax (and hence, the reduction in the value of the donor's estate after the gift is not equal to the value of the gift for the donee (that is very much the case with shares).

So, the inheritance taxman is quite generous (for once!) and allows you to have it both ways, because as the normal rules say, the gift date value is used by default to value gifts on death. Hence, there is protection in-built from increased asset values between gift and death!

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