Quick-Succession Relief

Definition

Quick-Succession Relief refers to a tax relief mechanism applied when the same property is subject to inheritance tax in the estates of two separate individuals, with the second individual passing away within five years of the first individual’s death. It aims to provide relief from the potentially severe financial burden of double taxation on the same asset within a short period.

How it Works

Initial Inheritance: Individual B inherits property from Individual A and pays inheritance tax of £X on A’s death.
Subsequent Death: If B dies within five years of inheriting the property from A, quick-succession relief applies to the inheritance tax liability on B’s estate based on the following scale:
- Within 1 year: 100% relief (full amount of £X)
- Within 1-2 years: 80% relief (80% of £X)
- Within 2-3 years: 60% relief (60% of £X)
- Within 3-4 years: 40% relief (40% of £X)
- Within 4-5 years: 20% relief (20% of £X)
Application: The relief is deducted from the total inheritance tax liability on B’s estate and not just a specific portion of it.

Examples

Example 1: John inherits a property valued at £200,000 from his aunt in 2021, resulting in an inheritance tax liability of £20,000. John passes away in 2022. The full £20,000 will be deducted from the inheritance tax that would be due on John’s estate due to the 100% relief.
Example 2: If John had died in 2023 (2 years after his aunt’s death), only 80% of the £20,000 (£16,000) paid originally would be eligible for quick-succession relief. The inheritance tax liability on John’s estate would be reduced by this amount.

Frequently Asked Questions (FAQs)

Q: What is the purpose of quick-succession relief? A: The purpose is to reduce the financial burden of inheritance tax on the same property when it is inherited within a short period between consecutive ownerships.
Q: Can quick-succession relief apply to any property type? A: Yes, it applies regardless of the property type as long as it meets the criteria of being taxed in the estates of two individuals, with the second person dying within five years of the first.
Q: Is the relief capped or limited to certain amounts? A: The relief is not capped by amount but is based on the percentage of the initial inheritance tax paid.
Q: How is the relief calculated if the second death occurs within 2.5 years? A: If death occurs within 2-3 years, the relief is 60% of the initial tax paid.
Q: Is the relief applicable only in the UK? A: This relief is specific to the inheritance tax laws in the UK, although similar mechanisms may exist in other jurisdictions.

Inheritance Tax: A tax paid on the estate (property, money, and possessions) of someone who has died.
Estate: All the money and property owned by a particular person, especially at death.
Double Taxation: The imposition of two or more taxes on the same property or income.
Tax Relief: Reductions in the amount of tax that must be paid.

Online References

Gov.uk — Inheritance Tax: quick succession relief

Suggested Books for Further Studies

Inheritance Tax Made Simple by James Kessler QC
Wills, Trusts & Estates, Ninth Edition by Robert H. Sitkoff
Taxation of Estates, Gifts and Trusts by Regis W. Campfield

Accounting Basics: “Quick-Succession Relief” Fundamentals Quiz

### How soon after the first death must the second death occur for full relief on inheritance tax? - [ ] Two years - [ ] Three years - [ ] Five years - [x] One year > **Explanation:** Full relief (100%) of the initial inheritance tax applies if the second death occurs within one year of the first death. ### What percentage of the initial inheritance tax is relieved if the second individual dies within 1-2 years? - [ ] 100% - [x] 80% - [ ] 60% - [ ] 40% > **Explanation:** If the second individual dies within 1-2 years, the relief stands at 80% of the initial inheritance tax paid. ### How much relief is available if the second death happens within 3-4 years? - [ ] 80% - [ ] 60% - [x] 40% - [ ] 20% > **Explanation:** The inheritance tax relief is 40% if the second death occurs within 3-4 years of the initial owner's death. ### What type of expense is quick-succession relief applied against? - [x] Inheritance tax - [ ] Income tax - [ ] Capital gains tax - [ ] Property tax > **Explanation:** Quick-succession relief is specifically designed to reduce inheritance tax within a short succession timeline. ### When calculating quick-succession relief, to which part of the estate is it applied? - [ ] Only to the property inherited initially - [ ] Simply to cash assets - [x] To the whole estate - [ ] Only to real estate assets > **Explanation:** The relief is deducted from the whole estate’s total inheritance tax liability. ### If John inherits property and dies three years later, what percentage of the initial inheritance tax will be eligible for relief? - [ ] 100% - [ ] 80% - [ ] 60% - [x] 40% > **Explanation:** If the second death occurs within 3-4 years of the first, the relief is 40% of the initial inheritance tax paid. ### Is quick-succession relief designed to prevent? - [x] Double taxation - [ ] Income tax evasion - [ ] Overvaluation of estate - [ ] Decreased asset liquidity > **Explanation:** The primary goal of quick-succession relief is to prevent the severe financial burden of double taxation on the same asset within a short period. ### On what principle does quick-succession relief operate? - [x] Time-based reduction - [ ] Property type - [ ] Value-based reduction - [ ] Stock performance > **Explanation:** Quick-succession relief operates on a time-based reduction principle where the relief amount decreases over time. ### Who is eligible to claim quick-succession relief? - [ ] Any taxpayer filing taxes - [x] An heir of the estate that has already been taxed within five years - [ ] Non-residents of the taxing country - [ ] Property managers > **Explanation:** Heirs who inherit property subject to inheritance tax within five years of the previous generation are eligible to claim quick-succession relief. ### For quick-succession relief to apply, what duration must not be exceeded between deaths? - [ ] One year - [ ] Three years - [ ] Ten years - [x] Five years > **Explanation:** The relief applies if the period between the deaths of the two individuals does not exceed five years.

Thank you for your attention to this hallmark of estate and inheritance tax planning. Best of luck in enhancing your knowledge and applications in the field!