IHTM45007 - Reduced rate for gifts to charity: components of the estate: general component

The general component, IHTA84/Sch1A/Para 3(4), is made up of all the property comprised in the estate apart from:

In the most cases, the general component will include the deceased’s free estate and any joint property owned as tenants in common. It will also include any property over which the deceased had a general power of appointment, IHTA84/S5(2), and property subject to a nomination.

All property, other than that excluded above, must be added together to establish the value for the general component as a whole for the purposes of the charitable giving condition (IHTM45002).

Where the deceased’s Will does not include a legacy to charity, or where a legacy is not sufficient for the general component to pass the 10% test, it is open to the beneficiaries of the estate to execute an Instrument of Variation (IoV) (IHTM35011) to make or increase a charitable legacy so that the estate can benefit from the reduced rate.

Sometimes, such a variation may simply sever a joint tenancy (IHTM15081) with the result that the joint property passes under the deceased’s Will. IHTA84/Sch1A/Para 3(2) says that the survivorship component includes all the property comprised in the deceased’s estate that, immediately before death was liable to pass by survivorship. For this reason this type of variation does not result in the severed property ‘switching’ to the general component. You should continue to include the joint property in the survivorship component for the purposes of the 10% test.

Similarly, where the Will does not include a legacy to charity or the legacy is insufficient, the trustees of a relevant property trust created by Will may, where the class includes charitable beneficiaries, make a distribution from the trust (IHTM35181) to the charity so that the estate can benefit from the reduced rate. Such a distribution must be made within 2 years of death and before an interest in possession has subsisted in the property.