Question

So-hyun and her husband, KJ, they each own assets valued at $3,000,000. If KJ dies in 2014 and leaves all of his assets to So-hyun, without the use of a trust arrangement, how much of his estate will be subject to tax? If So-hyun were also to pass away in 2014, after receiving KJ's assets, what will be her estate tax liability?

Answer 1

This Question gives a brief overview of Inheritance Tax.and this Question solved by replacing $ with £.

Inheritance Tax is chargeable on the property a person leaves on their death. Basically, anything up to £325,000 (2018-2019 tax rates) is Inheritance Tax free. Anything over £325,000 may incur tax at 40%.

As already mentioned assets left to a husband or wife or to a partner in a Civil Partnership, are exempt. Spouses often leave everything to each other and no tax is payable however much was involved.

If a widow or widower or the second one in a civil partnership dies then, subject to various conditions, their estate may be able to benefit from two sets of IHT allowances and leave up to £650,000 tax free.

Gifts to a husband or wife or between Civil Partners are exempt from tax. If the first to die leaves it all to their surviving spouse or civil partner then there is no tax payable on the first death. On the second death the estate has the benefit of two IHT free allowances which at present total £650,000 free allowances.

In the given Question KJ has its own property worth £3,000,000 and leave it all to his wife ( So-hyun), no tax is payable on her death. When(So-hyun) die, assuming the property is still worth £3,000,000, tax would be due on £ 2,350,000 (£3,000,000 less the personal tax exemption of £650,000) at 40%, a total of £9,40,000 .