Tax dodge of the week: how to save IHT after a death
It’s usually too late to save inheritance tax (IHT) if action isn’t taken until after a person’s death – but in the right circumstances, it is possible to save IHT after someone has died, says The Schmidt Report.
Where some of the deceased’s estate consisted of shares, IHT will be levied on the value of those shares on the date of death (ie, ‘probate value’). Sadly, since shares can fall, you may end up paying tax on the shares at a higher value than they stand at when they are transferred to the beneficiaries.
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The only way to avoid this is for the executors to sell those loss-making shares within 12 months of the death. Probate value will then be adjusted downwards and an IHT repayment can be secured.
Since the relief doesn’t work on individual sales, but on the aggregate of all sales of shares in that 12-month period, it’s easy to see that “by careful planning” executors can make sales of loss-making shares while retaining those standing at a gain in such a way as to maximise the relief and tax repayment. Similar relief applies to sales of land and buildings sold at less than probate value. The period allowed is 36 months, rather than 12.
