IHTM22074 - Tax burden on death: gifts of residue

The deceased has to bear the tax for the estate if they received a gift of the residue.

Example

Sergio died January 2010 leaving an estate of £550,000 - no business relief (IHTM25131) or agricultural relief (IHTM24001) was available.

By his Will, legacies totalling £200,000 were paid free of tax to chargeable beneficiaries, and the residue went to Marcos, also a chargeable beneficiary. Tax of £90,000 was paid.

Marcos dies in July 2011. Because all the legacies were free of tax, Marcos had to bear the tax on the whole estate. So, the net value of the assets received by Marcos was £260,000 (Sergio’s estate of £550,000 less legacies and tax (£200,000 + £90,000)).

The quick succession relief calculation is:

(£260,000 ÷ £550,000) x £90,000 x 80% = £34,036