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| Jimmy Jimmy died on 14 February 2011. He had made the following gifts during his lifetime: (1) On 2 August 2009 Jimmy made a cash gift of £50,000 to his grandson as a wedding gift when he got married. (2) On 14 November 2009 Jimmy made a cash gift of £800,000 to a trust. Jimmy paid the inheritance tax arising from this gift. At the date of his death Jimmy owned the following assets: (1) His main residence valued at £260,000. (2) Building society deposits of £515,600. (3) A life assurance policy on his own life. On 14 February 2011 the policy had an open market value of £182,000, and proceeds of £210,000 were received following Jimmy’s death. The cost of Jimmy’s funeral amounted to £5,600. Under the terms of his will Jimmy left £300,000 to his wife, with the residue of his estate to his daughter. The nil rate band for the tax year 2009–10 is £325,000.Required: (a) Explain why it is important to differentiate between potentially exempt transfers and chargeable lifetime transfers for inheritance tax purposes. |