Up to 22 March 2006, an accumulation and maintenance trust (A&M trust) was a discretionary trust where the property in the trust was held for the maintenance, education or benefit of the beneficiaries or until the beneficiaries reach the age of 25. The property in these trusts was not subject to or . From 22 March 2006, if the change the terms of the trust before 6 April 2008 to ensure that the beneficiary becomes absolutely entitled to the property in the trust on or before their 18th birthday, the trust will continue to be an A & M trust. If the trustees change the terms before 6 April 2008 to ensure that the beneficiary becomes absolutely entitled to the property in the trust between their 18th and 25th birthdays, the trust will become an and is subject to an age 18 to 25 exit charge whenever property leaves the trust and on the 25th birthday of the beneficiary. If nothing is done to change the terms of existing A & M trusts before 6 April 2008, they will become relevant property trusts and will be subject to proportionate charges.accumulatedproportionate chargesten-yearly chargestrusteesage 18 to 25 trust

 

When the income of a fund is saved up and not paid out to any beneficiaries, it is said to be accumulated.

 

A man who is appointed by the courts to administer a deceased person's estate in England, Wales and Northern Ireland; usually where there is no will or they are not named in the will.

 

Plural of administratrix.

 

A woman who is appointed by the courts to administer a deceased person's estate in England, Wales and Northern Ireland; usually where there is no will or they are not named in the will.

 

From 22 March 2006, an ‘age 18 to 25 trust’ is a discretionary trust set up under the Will or intestacy of a deceased parent or step-parent, where the property is held on trust for the benefit of someone aged over 18 and under 25. Accumulation and maintenance trusts set up before 22 March 2006 which provide for beneficiaries to become absolutely entitled to the trust fund on or before the age of 25 will become age 18 to 25 trusts if, before 6 April 2008, they rewrite the trust to comply with the new rules. The property in an 18 to 25 trust is subject to age 18 to 25 exit charges when property leaves the trust on or before the beneficiary’s twenty-fifth birthday.

 

The inheritance tax charge on an age 18 to 25 trust which occurs when

The total amount on which inheritance tax is charged. This is made up of the deceased’s personal and real estate, any interest in possessiontrusts in which the deceased was treated as having a beneficial interest , , the deceased’s share of , all made by the deceased in the seven years prior to death and the value of any from which the deceased was entitled to benefit as the original scheme member. gifts with reservationjoint propertychargeable transfersalternatively secured pension

 

Relief from Inheritance Tax which is due on the transfer of agricultural property. The relief applies to the agricultural value of the asset only.

 

Land or pasture used in the growing of crops or intensive rearing of animals for food consumption. Also can include farmhouses and farm cottages.

 

The value a property would have if it could only be used as agricultural property. More on agricultural value .

 

Shares which are traded on the Alternative Investment Market.

 

The amount you can give away each tax year that will be exempt from Inheritance Tax. This is currently £3,000 and applies to one gift or a number of gifts up to that amount. There are other exemptions which can apply.

 

A series of fixed payments paid over a fixed number of years or during the lifetime of an individual, or both. An annuity is often used to provide a pension. It can also be an annual payment provided for in a will.

 

A possession which has value, such as a house, land, cash or securities.

 

The clause in a will confirming that the will was signed by the testator in the presence of witnesses.

 

 

 

A bank is defined in s840A Taxes Act 1988 as

A beneficiary is a person or organization which receives property, or gets some benefit from, a or will, intestacytrust.

 

A person who is aged under 18 and at least one of whose parents or step-parents has died.

 

 

 

On an age 18 to 25 trust the chargeable amount is the amount by which the value of the trust has decreased as a result of a disposition by the trustees.

 

From 22 March 2006, a chargeable gift is, broadly, any gift which is not wholly covered by exemptions and given to the trustees of a or to a company. Gifts from one individual to another or to a are not chargeable gifts, but are relevant property trust disabled person’s trustpotentially exempt transfers.

 

A transfer of value made by an individual which is not an exempt transfer.

 

The chargeable value of an estate on death is the total of the assets less liabilities less exempt gifts and capital reliefs

 

A trust which is held indefinitely for charitable purposes only.

 

A charity is a UK registered charity or other qualifying body. Other qualifying bodies include organisations such as St John’s Ambulance, hospices and orphanages.

 

A transfer that is made to a charity or other qualifying body is exempt from inheritance tax.

 

Personal property such as household and personal goods, furniture, jewellery, antiques and works of art, stamp and coin collections, cars, caravans and boats, electrical equipment, clothes, books and garden equipment.

 

A person who has formed a civil partnership with someone else.

 

The legal relationship existing between two civil partners who have registered their partnership in accordance with the Civil Partnership Act 2004, which came into force on 5 December 2005.

 

 

See simultaneous deaths

 

A fund which is set up by a trade or professional organisation to pay compensation to people who have suffered loss or hardship which has been caused by the actions of members of the organisation.

 

 

 

See variation

 

A legal concept for inheritance tax purposes where a person is treated as if they were domiciled in the UK at the time of a transfer if

 

A disabled person is someone who, because of a mental disorder, is not capable of managing their own affairs or administering their own property or someone who is in receipt of attendance allowance or a disability allowance because they are entitled to the care component at the higher or middle rate.

 

A trust under which no individual has a right to an Generally, the have the power to decide who should receive the capital or income from the trust. Discretionary trusts are also interest in possession. trusteesrelevant property trusts.

 

Generally, a person's domicile is where they have their fixed and permanent home and to which, when they are absent, they always have the intention of returning.

 

Where a person has left their country of domicile to live in another country with the intention of settling permanently in the new country.

 

Under the age of 16 a child has the same domicile as the person on whom they are legally dependent. This is called a domicile of dependency.

 

This is acquired by a child at birth and is usually the domicile of the child's father at that time. It need not be the country in which the child is born.

 

 

 

A power of attorney which is not revoked by any subsequent mental incapacity of the person granting the power.

 

 

Up to 22 March 2006, for inheritance tax purposes, a person’s estate was made up of:

From 22 March 2006, a person's estate is made up of

In both cases, the total of all these assets is added to the chargeable value of any gifts made within seven years of the death to work out the amount on which tax is charged.

 

An estate where a full inheritance tax account is not required. From 6 April 2004 there are three types of excepted estate

A man who administers a deceased person's estate in England, Wales and Northern Ireland and is named in the will.

 

Plural of executrix.

 

A woman who administers a deceased person's estate in England, Wales and Northern Ireland and is named in the will.

 

Gifts that are exempt from inheritance tax. These include

An exempt transfer is one that is wholly covered by one or more exemptions.

 

Some gifts are exempt from inheritance tax because the gifts are covered by exemptions. See exempt gifts for details of the exemptions from inheritance tax which may apply.

 

 

 

A person whose civil partnership has been legally dissolved.

 

 

 

A gift made to a person who is about to get married or to form a civil partnership These gifts are exempt from IHT up to the following amounts:.

See gift with reservation of benefit.

 

A gift which is not fully given away so that the person getting the gift does so with conditions attached or the person making the gift keeps back some benefit for themselves.

 

The proof of legal authority required by the person who is entrusted with dealing with a deceased person's estate.

 

The proof of legal authority required by the person who is entrusted with dealing with a deceased person's estate where there is no will, or any will made is invalid.

 

The proof of legal authority required by the person who is entrusted with dealing with a deceased person's estate where there is a will but there is no executor named, or when the executors are unable or unwilling to apply for the grant.

 

The proof of legal authority required by the person who is entrusted with dealing with a deceased person's estate where there is a will.

 

An interim grant of representation which is only effective for a limited time, for example, while the validity of a will is being contested.

 

 

The total of all the assets that make up the deceased's estate before any of their debts are taken off.

 

See gift with reservation of benefit.

 

 

 

The Government department created from the merger of the Inland Revenue and HM Customs & Excise.

 

 

See chattels.

 

 

 

Immediately chargeable transfer

 

 

Inheritance Tax

 

Before 22 March 2006, there was an immediate claim for inheritance tax on gifts into discretionary trustsor to companies. For gifts made on or after 22 March 2006, an immediately chargeable transfer is one made to the trustees of a relevant property trust or to a company. Additional tax may be payable if the donor dies within seven years of the gift.

 

The Finance Act 2006 defined an immediate post-death interest (IPDI) as one where a person has an interest in possession in and all the following applysettled property

A person's possessions in the form interests in land and the permanent buildings on the land.

 

A tax on the value of a person's estate on death and on certain gifts made by an individual during their lifetime.

 

The inheritance tax threshold is the amount above which inheritance tax becomes payable. If the estate, including any assets held in trust and gifts made within seven years of death, is less than the threshold, no inheritance tax will be due on it.

 

Interest will be charged on any unpaid inheritance tax from the day the tax is due until the date of payment, no matter what caused the delay in payment. Interest is also charged on instalments.

 

This is a term in general law. Generally, a person has an interest in possession in property held in trust if they have the immediate right to use or enjoy the property or receive any income arising from it. Up to 22 March 2006, all such trusts were treated for inheritance tax purposes as owned by the person having the interest in possession.

An interest in a trust arising on or after 22 March 2006 will be regarded as an interest in possession (and therefore treated for IHTpurposes as owned by the person having an interest in possession) if it is one of the following:

If a person dies intestate, they died without making a will, or without fully disposing of their property by will. The administration of the estate is then governed by the provisions of the Administration of Estates Act 1925.

 

An estate where the person died intestate – without making a will.

 

Children or remoter issue of the deceased.

 

 

 

See joint property

 

Something which is jointly owned by two or more people either as a joint tenancy or as tenants in common .

 

A form of joint ownership where all the joint owners have an identical interest in the property. On the death of one owner, their interest passes to the remaining owner(s) by survivorship.

 

 

 

 

 

 

A person who holds a life interest in settled property.

 

A type of excepted estatewhere there can be no liability to inheritance tax because the total value of the estate, including the deceased's share of jointly owned assets, any and , does not exceed the inheritance tax threshold. specified transfersspecified exempt transfers

 

 

 

 

Goods, furniture and other items which can be moved from place to place (anything other than buildings or land).

 

 

Exemption from inheritance tax is given for gifts and bequests to certain national institutions such as the National Gallery.

 

The amount of an estate on which there is no inheritance tax to pay. If the value of an estate, including any assets held in trust and gifts made within seven years of death, falls within the nil-rate band there will be no IHT payable on the estate. Where the value of an estate exceeds the nil-rate band, only the amount above the nil-rate band is taxed at 40%.

Certain assets, such as deposits with Friendly societies, National Savings Bank accounts and National Savings Certificates, can be transferred on death direct to chosen beneficiaries by nomination.

Nominated property does not pass under the will or but it does form a part of the for inheritance tax purposes. intestacyestate

 

A person who holds property on behalf of another.

 

Gifts which are made purely out of income as part of a person's normal expenditure are exempt from inheritance tax. The claimant must show that after allowing for the gifts the donor was left with sufficient income to maintain their usual standard of living and that there was an established pattern of giving.

 

 

 

For inheritance tax, the open market value of an asset is the price it might reasonably fetch if it was sold on the open market at the time of the of that asset.transfer

 

A gift where the donor gives away full ownership of the gift and does not retain any benefit.

 

 

 

A gift of a sum of money under a will.

 

The country where a person intends to live for the remainder of their life. It is the country whose laws decide, for example, whether a Will is valid, or how the estate of a person who has not made a Will is dealt with when they die.

If a property is to be divided ‘per stirpes’ among the children of a deceased person, then each child takes an equal share. If a child has predeceased the deceased that child’s children will take equally between them the share that the predeceased child would have taken.

 

A person who administers a deceased person's estate. If there is a will and the personal representative is named in it they are known as an executor. If there is no will, or they are appointed by the court, they are known as an administrator.

 

See potentially exempt transfer.

 

A gift to a political party qualifies for exemption from inheritance tax if at the last general election preceding the transfer either two members of the party were elected to the House of Commons, or one member of the party was so elected and not less than 150,000 votes were given to candidates who were members of that party.

 

Up to 22 March 2006, a potentially exempt transfer (PET) was an outright gift to an individual, to an , or to a , which becomes an exempt transfer if the lives for seven years after the date of the gift.accumulation and maintenance trustdisabled person’s interestdonor

For transfers made on or after 22 March 2006, a PET is an outright gift to an individual, to a , or to a on the coming to an end of an which becomes exempt if the lives for seven years after the date of the gift.disabled person’s Interestbereaved minor’s trustimmediate post-death interest donor

 

An authority given by one person to another to act for him in their absence. The person authorised to act is the attorney of the other.

 

 

A will made by a soldier on active service or a sailor at sea which does not have to comply with the usual formalities to make it valid. It does not have to be in writing, or, if it is in writing, does not have to be witnessed by two witnesses. The soldier or sailor can also be a minor.

 

Strictly, the exhibiting and proving of a will by the executors. In common usage as a general term describe the process of obtaining a grant of representation.

 

The word 'property' for inheritance tax purposes includes all types of asset, cash, stocks and shares etc as well as land and buildings, including all rights and interests of any description that are legally enforceable.

 

 

 

 

 

Related property is property that is in the estate of a spouse or civil partner, or belonging to a charity or one of the political, national or public bodies to which exempt transfers may be made.

 

When settlor sets up a trust, any other trusts he sets up on the same day are related settlements.

 

Property on which business relief or is available.agricultural relief

 

Grandchildren, great-grandchildren (and so-on) of the deceased.

 

The part of an estate which is left after the payment of specific and , debts, funeral expenses and IHT.pecuniary legacies

 

The value of an asset may be reduced if the right to dispose of it is restricted.

 

 

 

See settlement.

 

A settlement occurs when property is held in trust for successive beneficiaries. The property which a settlor puts into trust is known as the trust fund or ‘settled property'.

 

A person who puts property into a trust. For inheritance tax purposes a settlor is the person who makes a settlement or who directly or indirectly provides the assets for a settlement.

 

For inheritance tax, if two or more people die and it is not known who died first, we assume that they have died at the same moment. This does not alter the legal position for the administration of the estate which is that the elder is presumed to have died first. This is also known as commorientes.

 

Assets are situated according to general law. Common examples of where assets are situated are

See situated

 

Small gifts which are exempt from inheritance tax of up to £250 in each tax year to any number of different recipients. The exemption cannot be combined with any other exemption such as the annual exemption.

 

A gift other than a gift of residue Typical specific gifts are gifts of particular assets such as the deceased's residence, furniture, jewellery and other household and personal goods and effects or shares in companies and business assets. pecuniary legacies,

 

Gifts made to the deceased's spouseor , , housing associations, and must be added back to the estate to see if the estate qualifies as an civil partner charitiespolitical partiesmaintenance funds for historic buildings employee trusts excepted estate.

 

A person who is legally married to someone else.

 

Gifts made between spousesor civil partners are exempt from inheritance tax. This exemption is limited to £55,000 if the deceased (or donor) was domiciled in the UK and their spouse or civil partner was not domiciled in the UK at the time of the transfer.

 

 

A person whose civil partnership has ended through the death of their civil partner.

 

Where property is owned jointly under a joint tenancy on the death of one of the joint tenants, the deceased's share of the joint property passes automatically to the surviving joint tenant(s). The property cannot be passed to anyone else under a will or intestacy.,

 

 

 

If the total chargeable valueof all the gifts made between three and seven years before a death is more than the threshold at death, then taper relief is due. The relief reduces the amount of tax payable on a gift, not the value of the gift itself.

 

An inheritance tax charge which arises on a relevant property trust on the tenth anniversary of the setting up of the trust and each subsequent ten-year anniversary.

 

See tenants in common.

 

Joint ownership of property where each joint tenant owns a separate share in the property. On the death of one of the joint owners, their share passes to their beneficiaries by their or will intestacy.

 

 

A man who has made a will.

 

A woman who has made a will.

 

See inheritance tax threshold.

 

Inheritance tax is charged on a transfer of value. That transfer can occur either during a person's lifetime, in the form of a gift, or on a person's death.

 

A person who receives a transfer.

 

A person who makes a transfer.

 

An obligation binding a person who holds the legal title, the trustee, to deal with the property for the benefit of another person; the beneficiary.

 

See settlement

 

The person who holds the legal title to settled propertyand who is obliged to deal with the property for the benefit of the beneficiaries.

 

A trust for a bereaved minor is a trustwhich is exempt from mainstream inheritance tax charges if it is held either

A discretionary trust set up for the benefit of a disabled person. After 9 March 1991 these trust were treated as if the disabled person had an in the property held in the trust. Any distributions from the trust to the disabled person are not taxable, but a charge to IHT will arise on their death and the trust fund will form part of their estate interest in possession

 

 

 

 

 

If all of the original beneficiariesagree, an inheritance under a or under an can be changed after death. will intestacy