Page 29 - CPB March 21st

What are the Inheritance Tax consequences around the time of termination of the Care Property Bond?
• the disposal of the property on any gain in the value of the property from the date of purchase of the Care Property Bond until the date of that disposal, whether or not the property is transferred to the customer’s Estate or sold. Any acquisition or sales costs (including legal fees, estate agent’s fees and Stamp Duty Land Tax) and any maintenance costs spent on the property by Shaw Insurance Group would be deducted in assessing the value of any gain. Please note that the tax payable by Shaw Insurance Group on capital gain (if any) would be a cost that Shaw Insurance would recover under the Care Property Bond.
Customers must seek legal or financial advice in relation to their individual tax situation, and their prospective Estate at the time of death.
Liability to Inheritance Tax very much depends on the customer’s personal circumstances and this area of taxation is not straightforward. Factors that will impact upon the Inheritance Tax payable include (but are not limited to):
• Gifts made by the customer within seven years of death (described in the language of the legislation as a ‘Potentially Exempt Transfer’ or “PET”);
• Any trust(s) established by the customer
prior to death; and
• The availability of any nil-rate bands (see below for detail).
On the death of the customer, the personal representatives are liable to pay any Inheritance Tax due on the customer’s estate. The Inheritance Tax forms will need to include the value of the net equity in the property at the date of the customer’s death. This information will be provided by Shaw Insurance to the personal representatives on the death of the customer.
As mentioned above, to calculate whether an estate is potentially subject to Inheritance Tax, any PETs should be taken into account. A PET is eligible for ‘Taper Relief’ if the customer dies within three to seven years of making that particular gift. Taper Relief reduces the Inheritance Tax payable on a gift in accordance with a sliding scale. If the customer survives seven years, the PET is not included in the customer’s estate for Inheritance Tax purposes. This analysis needs to be applied separately to all gifts made by the customer within 7 years of death.The first £325,000 of a customer’s estate (at current rates) is subject to Inheritance Tax at 0% (the ‘nil-rate band’). In addition, if a customer’s spouse or civil partner died without using up his/her nil-rate band, any unused proportion can be transferred to the surviving spouse or civil partner. The customer may therefore have a nil-rate band up to a maximum of £650,000.