IHT: exempt specific gift; grossed-up cash legacies, no residue

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Q&As

When is grossing up required?

For guidance on when grossing-up is needed, see Practice Note: Grossing up and partly exempt estates, particularly the section entitled 'When is grossing up required?'.

Note that on death, if the residuary estate passes wholly to non-exempt beneficiaries, grossing up does not arise, whether or not any specific legacy is tax-free or chargeable. Where a specific legacy is tax-free, the nominated sum or item is delivered as given and the relevant IHT is paid from the estate in the usual manner; the residuary estate is then calculated.

If grossing up applies and the combined amount of all specific gifts (both chargeable and exempt) exceeds the value transferred, i.e. the free estate for IHT, section 37(2) of the Inheritance Tax Act 1984 operates to reduce specific gifts so far as required to bring them down to the value transferred. See: IHTM12086, IHTM12088 and IHTM26180 (which sets out computations where abatement is triggered by grossing up).

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