Reduced rate for gifts to charity: components of the estate: survivorship component
The survivorship component, IHTA84/Sch1A/Para 3(2), is made up of all the jointly held assets or common property in the estate that passes by survivorship or under a special destination in Scotland (IHTM15081). It also includes any overseas property that passes under the law of the country in which it is situated that corresponds to survivorship or special destination.
Normally, property passing by survivorship will not qualify for charity exemption and will not be entitled to the reduced rate. However, the surviving joint owner is liable for the tax attributable to the joint property under IHTA84/S200(1)(c) (IHTM30022) and they may choose to redirect part of their entitlement to charity by an Instrument of Variation (IHTM35011) in order to 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.
However, because this component takes into account all joint property, where there are a number of items of joint property that the deceased held with different joint owners, action by a single joint owner may not be enough to benefit from the lower rate as the charitable giving condition (IHTM45002) is unlikely to be met for this component as a whole.
Note that where:
- property is held in joint names of the deceased and another for convenience; but
- the deceased provided all the funds so that the full value of the property is charged to tax at death,
the property should still be treated as part of the survivorship component because as a matter of fact, the funds pass to the surviving owner.