Probate inheritance tax and recent share price drop

[Scootersp]

Ok so this is about my partners family so all details aren't known by me, however I'll lay out he potential problem as I see it.

Partner and her sister lost their parents in close succession, Jan 2019 then June 2019. Sister is trying to get probate (via solicitor)

House is worth more than the threshold and their father had investments. Now even back in last year I heard these funds/investments had dropped ever since dad (and that was the good times!?) had put money in. Anyway despite this the amounts were such that the funds would be able to clear the inheritance tax and then the house could be sold etc at the girls leisure.

Now fast forward to today, still no probate granted, shares plummet as has their fund. From what they say and I read they couldn't have sold the shares anyway until probate was granted? But what I'm trying to find out is if they weren't able to then they shouldn't suffer all the original inheritance tax bill? ( presuming it was calculated some time ago as that's how they knew it would be cleared ok)

So I've seen there is a possible form for refunding the tax (I think it said within 12months of death, which is fast coming round so can a claim be made before probate is granted) but I'd really appreciate advice from anyone with professional or firsthand knowledge of this sort of thing.

So in summary probate is taking ages
Inheritance tax original calculation potentially too high now assets have dropped
Is there a way to recalculate but a time limit for doing this?
Anything else I/they should be aware of?

Thanks

[DickyC]

I think you're stuck with the original valuation as it represents the value at time of death. If the value increases you may pay tax, if it decreases the original valuation holds. My brother and I sold our parents' house for £108,000 more than the valuation for probate. The estate at time of death was a shade under the tax threshold. We paid Capural Gains Tax on the amount the house increased on value.

Unless there is something forcing you to sell why not hold the shares until markets recover?

[DickyC]

For us the Grant of Probate took eight months for a relatively simple estate. If you're in a hurry, ask your solicitor to have things prepared for probate. With ours, the Grant of Probate was like the start for the lawyers. Nothing was prepared. They could have had requests for sale of shares and so on signed by us ready to date and send. They had nothing ready. Mum died in March last year with a house, a dozen investments and a will written by the same law firm. What could be simpler? The estate still isn't finalised. Keep pressing them.

[Dr Mike Oxgreen]

IHT is calculated on the basis of asset values on the date of death. If values fall, I’m afraid that’s horribly bad luck.

It’s unlikely the shares could be sold prior to probate, especially if the amount is significant. But it’s up to each individual bank or financial institution - for example, when I went through this for both of my parents a couple of years ago, I was surprised that NS&I gave me the value of my mother’s premium bonds on the strength of just a death certificate even though it was about £20k.

Is there a reason why probate is taking so long? Have you got all your valuations and submitted the forms, or is it the valuations that are taking the time? For most things, it should simply be a case of writing to each institution with a copy of the relevant death certificate, requesting a probate valuation. Most organisations respond reasonably quickly, within a week or so. For the property, a proper “Red Book” valuation by a surveyor will make your probate application more watertight, and is worth the modest cost rather than relying on an estate agent’s guess. I seem to remember it taking maybe a couple of months to receive probate after submitting everything.

[DickyC]

The delay in granting probate seems to rest with the Probate Registry. Last year there was a rush because of an increase in fees that coincided with a change of computer system at the Registries. Each Registry covers a particular area, you can't choose. Mum and dad's house was in Devon so we had Cardiff who were snowed under and elected to use both systems, old and new, at the same time. From the outside, waiting for the grant, it seemed like bedlam.

[Alpinestars]

You can claim fall in value relief if you sell certain shares, within 12 months of death, at a loss compared to probate value.

You can’t extend the time limit.

Use this form to claim relief.

https://assets.publishing.service.gov.uk/governmen...

[Scootersp]

Cheers people I think initially they tried to do probate themselves which in hindsight was an error but now the solicitor is being a bit slow and/or the probate people.

So they've seemingly a few months to get probate and sell to qualify for a tax reduction?
The holding on to the investments advice is potentially sound but the inheritance tax bill needs paying quickly after probate I believe and attracts 4% interest otherwise, so a gamble on shares/market recovery?

They are going to both do ok when the house sells but just looking into the tax side and minimising any losses for them. The are stressing a bit, both folks dying, continual stressful house and paperwork stuff and the plan being set last year now changing due to current events etc so hopefully I can reduce a little stress with help from here.

[DickyC]

Discuss with the lawyer about whether both parents' inheritance tax allowances are available in this case. The combined threshold is £900,000 if the wills were set up to take advantage of this. Obviously the lawyer should be on top of this but they make mistakes. For example, both my brother and I were baled out by our parents in times of financial difficulty and In the proposed final accounts ALL the debts and gifts to both of us to be included in the reckoning were attributed to me. It made the numbers very uneven. Don't assume the lawyers are right; watch out.

[Scootersp]

Cheers I'm sort of detached from the process, the sisters get on fine, just are a big clueless (as I think we all are!?) on this sort of thing.

Appreciate all the info.