For current or recently former executors, the following could be helpful in either reducing the inheritance tax due or reclaiming tax to give more funds to legatees and beneficiaries of estates.
Executors and estates
Executors who are dealing, or who have dealt with, an estate might be able to either claim tax back or file the inheritance tax return with a lower liability than originally expected given the current market conditions. This could mean going back to deaths which occurred as long as four years ago.
With the shares and property markets falling, there is an opportunity to ensure that inheritance tax is paid on the released value from the sale of the assets, rather than it being based on the value of assets at the date of death when, perhaps, markets were much stronger.
The rules broadly apply where listed shares are sold within 12 months of the date of death. If sold at a lower value, the value at the date of death (probate value) can be replaced by the lower sale value in the inheritance tax return. There are various rules around the use of this relief, but key is that there needs to be an overall loss on all share disposals and the realised value of the entire portfolio will need to be less than the probate value in order to make the claim.
For land, more generous rules apply and deaths in the past four years can be considered. Where, within the four-year period, property has been sold for a price lower than probate value, the sale value can be substituted for the probate value. There are a number of conditions, for example that all property probate values will need to be replaced with the actual sale value (which could be higher in some cases), but for most individuals with one property this could be quite useful to review.
While on inheritance tax reliefs, it is worth noting that there is also a relief for assets chargeable on death which have been subject to inheritance tax in the previous five years. For example, if someone dies and their estate includes assets which they themselves had inherited and which were subject to tax on the previous owner’s estate.