Sunday, 15 January 2012

How to minimise inheritance tax if assets in the death estate stand at a loss after the death!

If during the estate administration period, any losses arising from the sale by the personal representatives of death estate assets (within 1 year for quoted shares and 3 years for land & buildings), will reduce the value of the estate and hence the inheritance tax due on death - thus resulting in practice in inheritance tax repayment.

However, once the administration of the estate has ended and assets have been distributed to the beneficiaries, there will be no IHT repayments should the beneficiaries sell their assets at a loss. So, where there are assets in the estate that have depreciated in value post death, PR's should move quickly in realizing any assets if they have to, in order to have the IHT bill reduced and hence protect the beneficiaries!

And another thing: there anti-avoidance provisions in place to ensure that PR's do not deliberately sell quoted shares at a loss in order to generate an inheritance tax refund. According to those, all purchases of shares up until 2 months after the last sale in the 12 months period after the death, are taken into account for the loss calculation. In the case of land & buildings, we need to look at purchases up to 4 months after the last sale in the 3 years period after the death.

As we can see, the way the law has been designed acknowledges the fact that in practice it is not so unusual for administration periods to drag for way too long periods!

No comments:

Post a comment