Inheritance Tax Act 1984 section 171

Changes occurring on death

Section 171 ensures that when valuing a deceased person's estate for inheritance tax purposes, certain changes in value caused by the death itself are treated as if they had occurred immediately before the death.

• Death can trigger changes in the value of a person's estate — for example, a life assurance policy paying out more on death than its pre-death market value — and these changes must be reflected in the estate valuation.
• The changes taken into account include additions to the estate's property, increases in the value of existing property, and decreases in value (unless the decrease results from an alteration to a close company's unquoted share or loan capital or rights attaching to its unquoted shares or debentures).
• The termination of an interest on death (such as a life interest in a trust) or the passing of an interest by survivorship (such as a jointly owned property passing to the surviving joint owner) is specifically excluded from this rule.
• Without this exclusion, the inheritance tax charge on settled property in which the deceased held a life interest, and on joint property passing by survivorship, would always be reduced to nil, since the value would effectively disappear from the estate on death.