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 |
150,000 | |
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 |
$150,000 | ||
less Relief | (6/10 × $30,000 × $19,965) | 3,434 |
$104,500 | ||
Duty payable on actual estate | 658 |