Top 3 inheritance tax queries from financial advisers
By Robbie Lawther, 8 May 19
IHT is a complex issue for many wealthy clients but Canada Life is asked about these issues the most
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3. When does the 14-year shadow take effect on CLTs and PETs?
Answer: Again, it depends.
The concept of the 14-year shadow, which relates to gift trust exemptions, is known by clients but they do not know when it becomes relevant, according to Canada Life.
In some cases, assets clients have given away as many as 14 years prior to their death can trigger a tax bill.
“The 14-year shadow is only an issue if, on death, the total of the Chargeable Lifetime Transfers (CLTs) and Potentially Exempt Transfers (PETs) made in the previous seven years exceeds the available NRB, meaning that tax is payable.” Jarvis said.
“For those considering making a PET and a CLT at, or around, the same time; it is logical to make the CLT before the PET as this can impact the periodic charges.
“However, when making a PET the donor should also be wary of any CLTs made in the previous seven years, and this is where professional advice is paramount.
“When looking at the tax on a failed PET we also have to go back seven years from the date of the PET.
“If a CLT had been made within this seven-year period, this needs to be considered when calculating the tax on the failed PET – and casts a potential shadow of 14 years on the overall IHT.”
Tags: Canada Life | IHT
