Example 3

Assume that, in example 1, Mr Smith left half his estate to his wife and the other half on trust for his wife during her life and thereafter to his adult son. Assume that Mrs Smith dies 9 years and 1 month after her husband and that, on her death, the rate scale in paragraph 24.B5 applies, that the value of the assets in the trust fund is $120,000, that the value of Mrs Smith's actual estate is $30,000, and that Mrs Smith leaves her actual estate to her adult son. The equivalent of an estate of $95,000 (i.e. ½ × $190,000) under the scale in paragraph 24.B5 is an estate of $104,500, and the equivalent tax on such an estate is $19,965 (i.e. ½ the tax on 2 × $104,500). Mrs Smith's estate will be:

Actual  30,000 
plus Life estate  120,000 
Duty on $150,000  20,460 
Duty attributable to trust estate $120,000/$150,000 × $20,460  16,368 

The trust estate (net value $120,000) may be assumed to include an amount equivalent to the inherited assets ($104,500)—indeed, unless the trustee has made distributions from corpus it can always be assumed to include such an amount—so that part of the relief will be available:

Duty on the trust estate  16,368 
less Relief (6/10 × $19,965)  11,979 
Duty payable by the trust estate  4,389 

Mrs Smith's actual estate ($30,000) cannot be assumed to include all of the inherited assets ($104,500), so that the relief will be limited as follows:

Duty on Mrs Smith's actual estate  $30,000 × $20,000  4,092 
less Relief  (6/10 × $30,000 × $19,965)  3,434 
Duty payable on actual estate  658