Value of whole£2,500,000
Maximum value of gift£325,000
Required value of retained interest£2,175,000

[2,175,000 x 100/90] ÷ 2,500,000
= 96.66666%

Therefore the share that is given and which results in a gift of £325,000 is only 3.33334% even though 3.33334% of £2,500,000 is only £83,333.

It is only necessary to go through this calculation when the first gift is made. As the property will no longer be owned exclusively by the taxpayer then their remaining interest will already have a discounted value.

Assuming the taxpayer subsequently wanted to make a further gift with a value of £325,000 then the calculation would be as follows:

325,000/2,175,000 x 96.66666%
= 14.444435%

A second gift by the taxpayer worth £325,000 will therefore be of a 14.444435% share of the whole.

The content of this article is for general information only. For further information regarding death in the digital age, please contact a member of the Estates Planning and Wills Team. Law covered as at October 2016.

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