When a client gives away assets during their lifetime, the gift rarely escapes Inheritance Tax cleanly. As a solicitor advising on wills and estates, you need to know how each gift is treated when it is made, what happens if the donor dies within seven years, and how prior gifts ripple through later calculations. Getting this right is central to estate planning and to administering an estate accurately.
This lesson builds the full picture step by step:
- Classifying Lifetime Gifts — how IHT sorts gifts into PETs and CLTs, and why the classification drives everything else.
- The Lifetime Charge on a CLT — calculating the immediate 20% charge, including grossing up where the donor pays.
- Cumulation and the Nil Rate Band — how the seven-year look-back determines the band available to each transfer.
- Reservation of Benefit — the rules that stop a donor giving an asset away while still enjoying it.
- Exemptions — the normal expenditure out of income exemption and its conditions.
- Death Within Seven Years: Recalculation — how PETs fail and lifetime tax is reworked.
- Effect on the Nil Rate Band and Cumulation — including the 14-year effect.
- Taper Relief — the sliding scale that reduces death tax.
- Payment, Credit and Liability — when tax falls due, how credit is given, and who bears it.