WILLS + ADMINISTRATION OF ESTATES MCQ’S
Inheritance Tax:
Hari, who never married, dies in September 2021 having made no lifetime chargeable transfers. He leaves his
entire estate to his brother.
He has the following assets, and no debts:
- House in sole name valued at £400,000
- Small shareholdings in a variety of quoted companies; in total these holdings are valued at £200,000
- Cash at the bank £100,000
Which TWO of the following statements are correct?
A. IHT will be payable at 40% on £700,000.
B. IHT will be payable at 40% on £375,000.
C. IHT will be payable at 36% on £700,000.
D. IHT will be payable at 36% on £375,000.
E. The whole of Hari's estate is chargeable for IHT purposes.
F. The first £325,000 of Hari's estate is exempt from IHT.
Response Feedback:
- The whole of Hari's estate is chargeable to IHT but the first £325,000 is charged at 0% and the balance is
charged at 40%. The 36% rate only applies if a sufficient proportion of the estate is given to charity, and
Hari gives nothing to charity.
- It is not correct to say that the property falling into the nil rate band is "exempt". When something is
exempt it has no IHT implications.
Hari, who never married, dies in September 2021 having made no lifetime chargeable transfers. He leaves his
entire estate to his brother. He has the following assets, and no debts:
- House in sole name valued at £400,000
- Small shareholdings in a variety of quoted companies; in total these holdings are valued at £200,000
- Cash at the bank £100,000
Which ONE of the following statements is CORRECT?
A. IHT will be payable at 40% on £700,000.
B. IHT will be payable at 36% on £375,000.
C. The whole of Hari's estate is chargeable for IHT purposes.
D. The first £325,000 of Hari's estate is exempt from IHT.
Response Feedback
- The whole of Hari's estate is chargeable to IHT but the first £325,000 is charged at 0% and the balance is
charged at 40%. The 36% rate only applies if a sufficient proportion of the estate is given to charity, and
Hari gives nothing to charity.
- It is not correct to say that the property falling into the nil rate band is "exempt". When something is
exempt it has no IHT implications.
In June 2021 William gives £600,000 to his favourite grandson, and on the following day pays £100,000 to a
discretionary trust.
Apart from making gifts on 6 April each tax year to use his annual exemption William has never made any other
lifetime transfers.
Which ONE of the following statements is CORRECTLY sets out the amount of IHT payable at the date of the two
gifts?
A. Nil.
B. £20,000.00
C. £40,000.00
D. £85,600.00
Response Feedback:
- The gift of £600,000 to his grandson is a Potentially Exempt Transfer and is not yet chargeable. The gift of
£100,000 into a discretionary trust is a Lifetime Chargeable Transfer. This is chargeable at the date of the
gift. However, there are no other chargeable lifetime transfers in the seven years before the date of this
, gift so William's full nil rate band is available. The gift into the discretionary trust will fall within William’s
nil rate band. No inheritance tax is payable at the date of these gifts.
Arthur dies in July 2021 leaving his entire estate to his son, Derek. Arthur’s assets comprise Arthur’ home worth
£400,000, a portfolio of quoted shares worth £60,000, an insurance policy paying out £90,000 on Arthur’s death
which he assigned to Derek nine years ago and bank accounts with balances totalling £32,000. He had credit
card bills and utilities bills unpaid, amounting to £8,000. Arthur's wife, Milly, died ten years ago, leaving all her
estate to Arthur. Neither Arthur nor Milly made any lifetime gifts (apart from the assignment of the insurance
policy mentioned above). None of the assets in Arthur's estate qualifies for any relief or exemption.
Which ONE of the following is the CORRECT amount of IHT payable on Arthur's estate?
A. Nil.
B. £63,600.00
C. £34,000.00
D. £193,600.00
Response Feedback:
- The insurance policy was assigned to Derek, so Arthur was not beneficially entitled to it at the date of his
death. It is therefore not included in the death estate. The remaining assets total £484,000 and that was
the amount chargeable to inheritance tax as none of the assets in the estate qualified for any relief or
exemption.
- Neither Arthur nor Milly had made any lifetime gifts that used their respective nil rate bands (the
assignment of the insurance policy by Arthur at its surrender value at that time was over 7 years before his
death and so became exempt).
- As Arthur's house passes to his son, Arthur's estate qualifies for his own residence nil rate band and takes
the benefit of the unused residence nil rate band of his spouse, Milly. Arthur's estate therefore qualifies for
a 100% uplift in the level of his residence nil rate band increasing it to £350,000 (£175,000 x 2). Arthur's
estate can take the benefit not only of his own nil rate band but also that of Milly. Arthur's estate therefore
qualifies for a 100% uplift in the level of his nil rate band, increasing it to £650,000 (£325,000 x 2). The
whole of his estate is therefore taxed at 0%.
Zak died in June 2021 owning the following assets in his sole name:
• Zak’s home £525,000
• Quoted shares (all small percentage holdings in various companies) £420,000
• Bank accounts £80,000
There were no debts. Zak was divorced. In his will he left his entire estate to his daughter.
Two years before he died Zak gave £36,000 to his daughter to help her with some medical expenses, but made
no other lifetime gifts.
Which ONE of the following is the CORRECT amount of IHT payable on Zak’s estate?
A. £210,000.00
B. £222,000.00
C. £224,400.00
D. £280,000.00
Response Feedback:
- The estate qualifies for the RNRB because Zak’s home is being inherited by a lineal descendant (his
daughter). The PET is £36,000, less two annual exemptions. The NRB is reduced by £30,000. This leaves
£295,000 of the NRB for the death estate. No exemptions or reliefs. The first £175,000 of the estate of
£1,025,000 is taxed at 0%. The next £295,000 is taxed at 0%. The remaining £555,000 x 40% = £222,000
Valerie died in September 2021. At the time of her death Valerie owned her home, The Lodge (valued at
£850,000). The property had originally been owned by Valerie’s husband, Mick, but it passed to Valerie, along
with the rest of Mick’s estate, when he died two years ago. Mick had made no lifetime gifts.
In addition to the Lodge, Valerie had £190,000 in a bank account, a life insurance policy (which Valerie took out
and had written in trust for her son, Lenny, 20 years ago and which had a maturity value of £90,000 on Valerie’s
death) and £100,000 worth of shares in Janson Ltd. Janson Ltd is a family company which manufactures
