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Liabilities

Liabilities are generally deductible from the value of an estate in full¹ (see I3.231 and I4.141), but there are exceptions to this rule. The most general one is that a liability not imposed by law is only deductible to the extent that it was incurred for consideration in money or money's worth². This may require a valuation of a liability when it was incurred in order to determine whether it was incurred for full consideration, and can also require valuation of the consideration itself.

Future liabilities

A future liability must be discounted³, where appropriate, in order that its value may be ascertained at the date of death or other event which gives rise to an IHT charge.

Example

H is legally bound to repay a debt of £10,000, without interest, three years after his death. Full consideration was given for the debt.

The £10,000 is discounted, on the death of H, to take account of the fact that his estate has the use of the money interest-free