Inheritance question

[the-norseman]

Hi all,

Looking for some assistance, unfortunately my mum is looking like she is going to get a terminal diagnosis at the end of the month and shes starting to plan what to do with the house etc. We lost dad 8 years ago but mum just inherited everything.

The mortgage was paid off last year, however my mum has given 50% of the house already to my sister (legally through solicitors), the remaining 50% is to be left to me.

There is other stuff such as a car (2015 smart car), a few watches (probably 2-2.5k worth) and a bit of money in the bank (nothing significant maybe 2-2.5k)

I am a homeowner (mortgaged), I also pay 40% tax, I broke £100k for the first time last year by £38, I dont have massive savings etc.

According to Zoopla house is worth between 453k and 680k with the current estimate being £566k. It does have 2 fields with it.

The plan is, when she goes, I will get my 50% and my sister & BIL will buy me out when they can (it wont be straight away). Am I going to end up getting stung for Inheritane Tax and are they?

The 50% when sold to them, will potentially make me almost mortgage free on my property.

[The Gauge]

Your dad s IHT allowance of about £0.5m would have rolled over to mum, giving her £1m to pass down tax free. Not sure if gifting half her house away to your sister will complicate things. Was that done in the last 7 years? Hopefully it will all be free from IHT if your value of her estate is accurate and within her allowance.

Dad should have had £325k allowance plus £175k for the house, which should have rolled over to mum who also has the same allowance, now effectively x2

Edited by The Gauge on Friday 18th July 10:43

[the-norseman]

Yeh the 50% was given to my sister, earlier this year (before we knew she was ill). I've been reading online that if you give it away before death you should pay rent unless you give only part of it away, which she has. So she should be in the clear for the rent.

[Phil.]

If the gift was made recently then it will be included in the IHT calculation.

I suggest you total up the value of all the assets including your sisters 50% and if they fall below £1m your mum’s estate shouldn’t need to pay any IHT.

[the-norseman]

Phil. said:

If the gift was made recently then it will be included in the IHT calculation.

On that bit, the GOV website says inside 7 years unless mum has paid rent, but then it carries on to say if she hasn't given away the whole house then it wont be included, and she hasn't.

But yeh were getting nowhere near £1M thats for sure.

[The Gauge]

Did your dad leave any money to anyone on his death, or did it all go straight to mum?

My dad left his 3 children £10k each on his death, the rest going to mum, but we are now looking into whether that affects mums IHT seeing as she recently passed away.

[the-norseman]

Nope he didn't everything went to mum with the exception of 2x watches (1 to me, 1 to sister).

[megaphone]

First thing to note is the estate pays any IHT that is due, not you or your sister. What you or your sister earn, or have saved, or what income tax you pay is irrelevant, it will have nothing to do with any IHT due from the estate. Any IHT has to be paid to the government by the estate executors before they can distribute the assets to the beneficiaries of the will.

As others have said, if the estate is under £1m then it is unlikely any IHT will be due.

Don't get hung up on trivial stuff like jewellery or watches etc. You/the executors will have to fill out a IHT form before probate is granted, it is quite involved, adding trivial stuff makes it even more involved.

As a side note, do you have a Lasting Power of Attorneys (LPA) set-up for your mother? Could be important if she becomes ill and can't make decisions for herself. She will need to set them up.

Another good ideas is to make her bank accounts 'joint' with you or your sister so you can access them and make payments if your mother can't. Get access to her email accounts so you can deal with bills etc.

Edited by megaphone on Friday 18th July 12:59

[the-norseman]

Thanks for the above, sister is joint of most of the accounts I think, LPA I dont think either of us have yet.

Emails are easy as we set up her phone for her etc.

If there was IHT to pay and it comes out of the estate, bearing in mind there isn't much money its mainly the house, would that mean the house has to be sold or the 50% that isn't owned by sister?

Sister/BIL had the deposit to mortgage the 50% but they have just blown it on a new kitchen and bathroom and now been told by Barclays that they would need a deposit to mortgage the other 50%.

Edited by the-norseman on Friday 18th July 13:04

[alscar]

The Gauge said:

Did your dad leave any money to anyone on his death, or did it all go straight to mum?

My dad left his 3 children £10k each on his death, the rest going to mum, but we are now looking into whether that affects mums IHT seeing as she recently passed away.

I would assume that the £30k left to you and your sibling's would "come off " the total that your Dad passed over to your mum in allowance ie £470k.

[megaphone]

the-norseman said:

Thanks for the above, sister is joint of most of the acounts I think, LPA I dont think either of us have yet.

Emails are easy as we set up her phone for her etc.

The LPAs are important is you think your mother may not be able to make decisions for herself going forward. There are two types , one for finance and one for health. Your mother needs to set them up and name you and your sister as attorneys. Can be done DIY or a solicitor will want a few £100.

https://www.gov.uk/power-of-attorney

Edited by megaphone on Friday 18th July 13:10

[Richard-D]

alscar said:

I would assume that the £30k left to you and your sibling's would "come off " the total that your Dad passed over to your mum in allowance ie £470k.

A proportion of it will. There is likely to be an amount that can be written off as a non taxable gift.

[alscar]

Sorry about your Mum.
The LPA/s ( particularly for Finance but also Heath and Welfare ) is a good idea but it sounds as if you need to be quick off the mark to get that process started.
With them you can gain control of all of your Mums bank accounts etc so no need to try and set up joint accounts as such and it will also avoid you having to keep scrupulous accounts for passing over to the Executor's when the sad day eventually happens.

[the-norseman]

I think me and sister will be the executors as well as the people receiving it all, if that is allowed?

[megaphone]

the-norseman said:

I think me and sister will be the executors as well as the people receiving it all, if that is allowed?

The executors are usually named in the will, does your mother have a will? If not it is important she writes one asap.

[alscar]

Richard-D said:

alscar said:

I would assume that the £30k left to you and your sibling's would "come off " the total that your Dad passed over to your mum in allowance ie £470k.

A proportion of it will. There is likely to be an amount that can be written off as a non taxable gift.

Good point although presumably only £3k in aggregate per tax year ?

[the-norseman]

megaphone said:

The executors are usually named in the will, does your mother have a will? If not it is important she writes one asap.

Yes she does and its been updated recently, were the only people named in it.

[alscar]

the-norseman said:

I think me and sister will be the executors as well as the people receiving it all, if that is allowed?

Yes and quite normal.

[megaphone]

the-norseman said:

megaphone said:

The executors are usually named in the will, does your mother have a will? If not it is important she writes one asap.

Yes she does and its been updated recently, were the only people named in it.

So you and your sister are named as executors? And are the only beneficiaries?

[alscar]

megaphone said:

the-norseman said:

Thanks for the above, sister is joint of most of the acounts I think, LPA I dont think either of us have yet.

Emails are easy as we set up her phone for her etc.

The LPAs are important is you think your mother may not be able to make decisions for herself going forward. There are two types , one for finance and one for health. Your mother needs to set them up and name you and your sister as attorneys. Can be done DIY or a solicitor will want a few £100.

https://www.gov.uk/power-of-attorney

Edited by megaphone on Friday 18th July 13:10

I know it gets mentioned on here a fair bit but worth reiterating your point that everyone should have both the LPA's set up way in advance of when they might actually be needed and equally a good time to do the will then too.
Arguably the LPA's can be of more importance.
Also worth making the point that quite often whilst completion is relatively straight forward getting them then registered by the OPG to become valid can take anything up to 6 months !