If you have recently inherited shares that have now collapsed in value due to the coronavirus pandemic, you could be entitled to a substantial inheritance tax (IHT) repayment.
Fears about the virus have led to widespread panic selling, causing markets around the world to plummet. Heirs who paid IHT on inherited shares when they were at their peak value last year, could now find themselves at a significant loss after selling those investments. On the other hand, those who have not yet disposed of their shares will be facing a difficult decision of whether to retain or sell.
By way of background, IHT is worked out based on the market value of the assets at the date of death. The portion of the estate that exceeds the tax-free threshold is taxed at 40%. IHT must be paid within six months of the person’s death.
If inherited shares have already been sold at a loss, the executor(s) of the estate may be able to claim back overpaid IHT. HMRC will not notify you if you have overpaid so, if you are unsure, do not hesitate to contact our solicitors for advice on whether a rebate is due.
HMRC will refund the estate if the following conditions are met:
If you have not yet disposed of your inherited shares, you will have to consider whether to keep the investments for longer in case prices bounce back or sell them within 12 months and claim back overpaid IHT that may be due.
You should approach this decision carefully. While retaining the investments may mean you can benefit from values that have recovered, it may be some time before this happens and could mean protracting the administration of the estate. On the other hand, although a substantial IHT rebate may appeal to many who are experiencing financial strain right now, it would mean having to sell the shares quickly and would crystallise losses when prices could improve. Further, as it is the net loss that you can claim back, any shares disposed of at a profit will impact the amount you can recoup.
For individuals in this situation, professional advice is vital. Our Executry and Estate Planning Solicitors can advise you on the legal and tax implications that apply to your circumstances and recommend the best way to protect your investments.
Coronavirus is having a profound impact on various aspects of our lives. At Murray Beith Murray, we are here to support you with many of the challenges you are facing during these extraordinary circumstances. If you would like to discuss any of the issues covered here, or if you require assistance with any other Executry or Estate Planning matter, please complete our contact form or call us on 0131 341 3621.
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