When assets pass to an individual on death, they may or may not be subject to Inheritance Tax. They are, however, generally exempt from CGT. In addition the new owner is treated as if they had acquired the asset at its market value at the date of death. This is referred to as the CGT uplift on death and, under the right circumstances, it can provide an opportunity to save significant amounts of tax.
One of those circumstances involves “deathbed planning.” When a member of a married couple or civil partnership dies whilst holding assets such as investment property or stock market investments. These assets will generally attract CGT at 28% or Inheritance Tax at 40% on death.
However, and this is the key part, these assets can usually be passed to a surviving spouse free of both taxes.
Following this, the capital gains tax uplift provides the surviving individual with an opportunity to make a gift of the assets to any children. After seven years this would then fall outside of the individuals IHT estate.