The dreaded Probate and Inheritance tax
Discussion
Unfortunately my FIL passed away last week, and it appears that dealing with all the fallout is going to end up in my lap.
Now, I'm happy to deal with this all myself, but it all looks rather complicated.
There's a will and my wife is named as an executor - so i thought you just applied for probate, but it appears we have to deal with the Inheritance tax first.
His estate is going to be above the £325K threshold, does this mean that we have to complete the IHT400 forms and pay the 40% tax bill before we can apply for probate ? Do i have to pay the tax out of my own pocket and then claim it back from the estate?
For valuation purposes, are the average of a few estate agent valuations sufficient ? Same for the content, no antiques or expensive jewlery lying around. Its all older stuff with little to no value, how do you go about valuing that !
Is the next step filling in those IHT400 forms and posting off ?
Uncharted waters here, so any thoughts greatly appreciated!
Now, I'm happy to deal with this all myself, but it all looks rather complicated.
There's a will and my wife is named as an executor - so i thought you just applied for probate, but it appears we have to deal with the Inheritance tax first.
His estate is going to be above the £325K threshold, does this mean that we have to complete the IHT400 forms and pay the 40% tax bill before we can apply for probate ? Do i have to pay the tax out of my own pocket and then claim it back from the estate?
For valuation purposes, are the average of a few estate agent valuations sufficient ? Same for the content, no antiques or expensive jewlery lying around. Its all older stuff with little to no value, how do you go about valuing that !
Is the next step filling in those IHT400 forms and posting off ?
Uncharted waters here, so any thoughts greatly appreciated!
If it's a decent size estate why not pay somebody who knows what they're doing to do the technical stuff? There's not much of it and if you do the "running about" yourself the costs shouldn't be very high.
Yes, the IHT needs to be paid up front. If there are investments around which can be sold you can usually persuade banks etc to release funds to pay the some or all of the tax. Easier if it's done by a solicitor who can act as a sort of "honest broker" between you, the banks etc and HMRC. Otherwise there is a "payment by instalments" system available although interest will be charged by HMRC.
Preliminary house valuation you can do by getting three estate agents' estimates. However, you'll either need to pay for a formal RICS valuation if the house isn't being sold or put an "estimate" on your IHT400 for later adjustment. i.e. When the house sells you know exactly what it was worth - the selling price. Note that if the value of the house increases between date of death and date of sale there may be CGT to pay.
Yes, DIY is possible. It's well worth getting one of the probate guide books from e.g. Amazon whether you do it yourself or pay a solicitor.
Probate is slow at the moment. UK death rate has increased due to Covid19, overloading the system. Civil servants have all been on go slow working from home (!) etc due to Covid19. Expect delays.
Yes, the IHT needs to be paid up front. If there are investments around which can be sold you can usually persuade banks etc to release funds to pay the some or all of the tax. Easier if it's done by a solicitor who can act as a sort of "honest broker" between you, the banks etc and HMRC. Otherwise there is a "payment by instalments" system available although interest will be charged by HMRC.
Preliminary house valuation you can do by getting three estate agents' estimates. However, you'll either need to pay for a formal RICS valuation if the house isn't being sold or put an "estimate" on your IHT400 for later adjustment. i.e. When the house sells you know exactly what it was worth - the selling price. Note that if the value of the house increases between date of death and date of sale there may be CGT to pay.
Yes, DIY is possible. It's well worth getting one of the probate guide books from e.g. Amazon whether you do it yourself or pay a solicitor.
Probate is slow at the moment. UK death rate has increased due to Covid19, overloading the system. Civil servants have all been on go slow working from home (!) etc due to Covid19. Expect delays.
Thanks Rockin.
I just want to avoid the estate paying out sums unnecessarily for what may be nothing more than a form filling exercise. Of course, i have no idea what a solicitor would change for such a service.
I suspect the gross value of the estate to be something in the order of £395K with a net value of around £335K
I just want to avoid the estate paying out sums unnecessarily for what may be nothing more than a form filling exercise. Of course, i have no idea what a solicitor would change for such a service.
I suspect the gross value of the estate to be something in the order of £395K with a net value of around £335K
If that estate of £395k includes the deceased's home, which is being left to a direct decendant (i.e. child, grandchild), then as well as the normal £325k nil-rate band on the estate, then you should also have a £175k residence nil-rate band available as well, which means you should avoid IHT completely.
OP, whilst I appreciate you want as much money to go to those inheriting as possible, think about if you want the hassle of dealing with the fallout if people believe you have done anything wrongly
When my uncle died (never married or had children) my mum and sister were the executors. He was my late dad's brother and relations were not close in a few places with the rest of his family. In order to ensure that there could be no comebacks and bearing in mind the impact on each inheritee would be less than £1000 from an estate that had things been different (i.e. had he had children of his own) they wouldn't have seen anyway we decided to make sure it was fully managed and documented by someone independant all the way through.
When my uncle died (never married or had children) my mum and sister were the executors. He was my late dad's brother and relations were not close in a few places with the rest of his family. In order to ensure that there could be no comebacks and bearing in mind the impact on each inheritee would be less than £1000 from an estate that had things been different (i.e. had he had children of his own) they wouldn't have seen anyway we decided to make sure it was fully managed and documented by someone independant all the way through.
Some banks can offer a ‘probate loan’ which is a secured short term loan payable when probate is granted and the estate pays out.
Inheritance tax can be complicated and it’s very easy to end up paying more tax than is strictly necessary as there’s numerous allowances that can be applied (things like transferable nil rate bands and the like). It may well be worth speaking to a specialist probate solicitor for advice.
Inheritance tax can be complicated and it’s very easy to end up paying more tax than is strictly necessary as there’s numerous allowances that can be applied (things like transferable nil rate bands and the like). It may well be worth speaking to a specialist probate solicitor for advice.
I did my mum’s myself - it can all be done online if the estate isn’t complicated. There’s been stories on here of people being reamed 10’s of thousands on probate.
The tossers trying to charge a % of the value of the estate seem to my layman’s eyes to be the worst. Bit like a garage charging you a % of the value of your car to change the oil.
A married couple where one partner dies and passes whole estate to surviving parter and doesn’t use their iht allowance at all can combine it with the recent deceased - so that’s £650k then if the house gets passed to the their kids, there’s another £170k allowance increase.
Essentially it’s:
death cert
deal with iht
apply probate only after iht is dealt with
notices in the gazette and local paper
sell assets
make up final statement of account
distribute funds
I used my personal bank account to do all this, but I would recommend getting a separate account to keep things easier to track
edit;
OP - Is your wife the only executor named on the WIll? - My mum had the solicitors write her will and I and the solicitors were named joint executors - the idea was that I could do it or if not the solicitors would do it.
The reality is that all executors need to apply jointly for probate and because they weren't doing the probate they wouldn't agree/sign it. So you have two choices pay them to do probate or pay them to resign from the WIll.
Given that I had done everything and was essentially at the last step I decided to pay them to resign the Will which cost me £350 and a two week wait for a single page of A4.
So whenever you are getting a will done - if the solicitors put themselves down as sole or joint executors - they are essentially just banking future work because you either pay them to do the probate or pay them to resign.
The tossers trying to charge a % of the value of the estate seem to my layman’s eyes to be the worst. Bit like a garage charging you a % of the value of your car to change the oil.
A married couple where one partner dies and passes whole estate to surviving parter and doesn’t use their iht allowance at all can combine it with the recent deceased - so that’s £650k then if the house gets passed to the their kids, there’s another £170k allowance increase.
Essentially it’s:
death cert
deal with iht
apply probate only after iht is dealt with
notices in the gazette and local paper
sell assets
make up final statement of account
distribute funds
I used my personal bank account to do all this, but I would recommend getting a separate account to keep things easier to track
edit;
OP - Is your wife the only executor named on the WIll? - My mum had the solicitors write her will and I and the solicitors were named joint executors - the idea was that I could do it or if not the solicitors would do it.
The reality is that all executors need to apply jointly for probate and because they weren't doing the probate they wouldn't agree/sign it. So you have two choices pay them to do probate or pay them to resign from the WIll.
Given that I had done everything and was essentially at the last step I decided to pay them to resign the Will which cost me £350 and a two week wait for a single page of A4.
So whenever you are getting a will done - if the solicitors put themselves down as sole or joint executors - they are essentially just banking future work because you either pay them to do the probate or pay them to resign.
Edited by eliot on Monday 21st September 09:09
littlebasher said:
Thanks Rockin.
I just want to avoid the estate paying out sums unnecessarily for what may be nothing more than a form filling exercise. Of course, i have no idea what a solicitor would change for such a service.
Agreed. With some brains you can do it yourself. The last thing you want is a useless solicitor who will take months and cost you thousands for what is no more than clerical work with a dash of accountancy.I just want to avoid the estate paying out sums unnecessarily for what may be nothing more than a form filling exercise. Of course, i have no idea what a solicitor would change for such a service.
Your wife is Executor so she needs to send copies of the death cert to all parties concerned - banks, insurance cos etc - who will then release funds to her. They have special departments for this as it happens every day, just ring them for help and advice.
Section 5 at https://www.gov.uk/after-a-death may be helpful.
I'll go against the grain and say get a solicitor.
We've just got probate on my mum's estate and it took a year, and that wasn't the solicitor stretching it out for more cash as we had a fixed price agreement.
The last thing we needed was the hassle of doing it ourselves just to save a couple of grand.
We've just got probate on my mum's estate and it took a year, and that wasn't the solicitor stretching it out for more cash as we had a fixed price agreement.
The last thing we needed was the hassle of doing it ourselves just to save a couple of grand.
As mentioned above see if the residence nil-rate band can be applied or if he was married any unused IHT allowance could be carried over.
For the house valuation the average from estate agents is fine, I only got two but both were identical anyway. I was also in a similar position to you with nothing in the house being worth anything and just entered £0 for the household and personal goods valuation.
The IHT helpline is also very good if you get stuck and need advice.
For the house valuation the average from estate agents is fine, I only got two but both were identical anyway. I was also in a similar position to you with nothing in the house being worth anything and just entered £0 for the household and personal goods valuation.
The IHT helpline is also very good if you get stuck and need advice.
I think it is now 7 times that I have been the executor/administrator of the estates of relations. I have dealt with them all in full except my Mum's and one of my brother-in-laws because there was a chunk of property to dispose of so I appointed a solicitor specifically for that purpose.
I have done all "by the book", by which I mean I purchased an excellent book on the subject with lots of good practical advice (can't remember the book title), set up an action plan and then followed that through. Points to note:
1. I have always set up two executor's bank accounts, one for the loan to pay probate and expenses, and the other to receive and hold assets and their eventual distribution to beneficiaries. I've used the deceased's bank for this purpose.
2. Get lots of copies of death certificates. Plenty are needed and almost always originals, and it helps momentum if you're not waiting for originals to be returned so you can send them to other parties.
3. Always keep pristine comprehensive records especially of all financials. You'll need to ensure that these show all expenses including minor items such as postage all of which mount up and you should not be paying for these yourself.
4. I've always found banks willing to meet the funeral costs ahead of probate so you can get this bill paid out of one of your two bank accounts.
5. Once you are confident that you have discovered all assets and had them valued, and you know all the liabilities, you can move on to get probate. I have found the most tiresome assets to establish full details for are share holdings if there are any, but it has to be done.
6. Probate costs and IHT can be paid out of one of your established bank accounts.
7. Once probate has been obtained you should move as fast as possible to get the assets into your accounts and also pay off all liabilities of administration as executor.
8. Prepare the accounts in draft form. No need to be worried about this as they are reasonably straightforward and there's lots of specimens/examples available.
9. You should also move quickly to disperse net assets according to the Will. By the way, try and avoid telling beneficiaries what they may receive until after probate: if you get it wrong they will not be happy!
10. And finally, if there are any bequests etc to charities, NEVER tell them in advance. I made that mistake once when two charities were involved and they phoned me every day demanding progress updates, telling me I was too slow, and wanting all the time details of both the amount they would get and when I will pay it. I learned a lot about the "other side" of charities during this experience!
R.
I have done all "by the book", by which I mean I purchased an excellent book on the subject with lots of good practical advice (can't remember the book title), set up an action plan and then followed that through. Points to note:
1. I have always set up two executor's bank accounts, one for the loan to pay probate and expenses, and the other to receive and hold assets and their eventual distribution to beneficiaries. I've used the deceased's bank for this purpose.
2. Get lots of copies of death certificates. Plenty are needed and almost always originals, and it helps momentum if you're not waiting for originals to be returned so you can send them to other parties.
3. Always keep pristine comprehensive records especially of all financials. You'll need to ensure that these show all expenses including minor items such as postage all of which mount up and you should not be paying for these yourself.
4. I've always found banks willing to meet the funeral costs ahead of probate so you can get this bill paid out of one of your two bank accounts.
5. Once you are confident that you have discovered all assets and had them valued, and you know all the liabilities, you can move on to get probate. I have found the most tiresome assets to establish full details for are share holdings if there are any, but it has to be done.
6. Probate costs and IHT can be paid out of one of your established bank accounts.
7. Once probate has been obtained you should move as fast as possible to get the assets into your accounts and also pay off all liabilities of administration as executor.
8. Prepare the accounts in draft form. No need to be worried about this as they are reasonably straightforward and there's lots of specimens/examples available.
9. You should also move quickly to disperse net assets according to the Will. By the way, try and avoid telling beneficiaries what they may receive until after probate: if you get it wrong they will not be happy!
10. And finally, if there are any bequests etc to charities, NEVER tell them in advance. I made that mistake once when two charities were involved and they phoned me every day demanding progress updates, telling me I was too slow, and wanting all the time details of both the amount they would get and when I will pay it. I learned a lot about the "other side" of charities during this experience!
R.
sociopath said:
I'll go against the grain and say get a solicitor.
We've just got probate on my mum's estate and it took a year, and that wasn't the solicitor stretching it out for more cash as we had a fixed price agreement.
The last thing we needed was the hassle of doing it ourselves just to save a couple of grand.
From death, post mortem, death cert, IHT, getting the solicitor off the will and grant of probate I did in 6 weeks.We've just got probate on my mum's estate and it took a year, and that wasn't the solicitor stretching it out for more cash as we had a fixed price agreement.
The last thing we needed was the hassle of doing it ourselves just to save a couple of grand.
However - grant of probate means you can start dealing with things such as selling the property which took just over 12 months from probate. There's various statutory limits, such as putting the notices in the gazette and having to wait and there's some other thing that you should wait 6 months to elapse for as well.
So a year is about right to be fair.
Daunting or what!
My wife seems to think this would be dealt with in weeks, i've had to give her a steer on that.
Two executors, my Wife and my late FIL long term lady friend
He's long since divorced, so can't uplift the £325K threshold. The house is to be sold and the proceeds split between 7 parties named in the will (Lions share going to my Wife)
House i reckon will be valued at £375K
£20K cash in bank
£5K savings bond due to mature next month
Contents negligiable, but i suspect will round up to about £3K
£62K Mortgage
£5K funeral costs (ish)
So puts us over by about £13K (so IHT can be paid out of the cash he already holds)
Of course, the Estate agents could value it less (identical house sold earlier this year opposite for £375K, our one needs modernising !)
Lots to think about and i appreciate all the comments
My wife seems to think this would be dealt with in weeks, i've had to give her a steer on that.
Two executors, my Wife and my late FIL long term lady friend
He's long since divorced, so can't uplift the £325K threshold. The house is to be sold and the proceeds split between 7 parties named in the will (Lions share going to my Wife)
House i reckon will be valued at £375K
£20K cash in bank
£5K savings bond due to mature next month
Contents negligiable, but i suspect will round up to about £3K
£62K Mortgage
£5K funeral costs (ish)
So puts us over by about £13K (so IHT can be paid out of the cash he already holds)
Of course, the Estate agents could value it less (identical house sold earlier this year opposite for £375K, our one needs modernising !)
Lots to think about and i appreciate all the comments
"Under the rules, if you're passing your home to a direct descendant, you can benefit from an additional £175,000 in tax-free allowance in the 2020-21 tax year, up from the £150,000 allowance in 2019-20. The allowance only applies if you leave your home to a direct descendant – either a child or grandchild"
not sure if that helps in your situation.
not sure if that helps in your situation.
Just for a little recent experience on timings; Lost Mum in May, was under the tax threshold as estate was mostly the house which meant threshold was 475 not 325, there were a few odds and sods to tidy with pensions including my Dad's which she was in receipt of half since he passed away last year.
My sister did all the probate with the help of a friend, submitted end of May, Will was confirmed 13 weeks later so money is now available to divide after settling final bills.
My sister did all the probate with the help of a friend, submitted end of May, Will was confirmed 13 weeks later so money is now available to divide after settling final bills.
Edited by JustinF on Monday 21st September 15:18
Jasey_ said:
On the solicitor front we had a estimated price agreement when my dad died and the 
charged my mum 3 times the agreed amou despite the complexity of the estate not changing from his original estimate.
So when my mum died I did it myself.
Daunting at the start but actually quite straight forward provided you are methodical.
I handled this for my late Mum. Not difficult really. charged my mum 3 times the agreed amou despite the complexity of the estate not changing from his original estimate.So when my mum died I did it myself.
Daunting at the start but actually quite straight forward provided you are methodical.
The Leaper said:
I think it is now 7 times that I have been the executor/administrator of the estates of relations. I have dealt with them all in full except my Mum's and one of my brother-in-laws because there was a chunk of property to dispose of so I appointed a solicitor specifically for that purpose.
I have done all "by the book", by which I mean I purchased an excellent book on the subject with lots of good practical advice (can't remember the book title), set up an action plan and then followed that through. Points to note:
1. I have always set up two executor's bank accounts, one for the loan to pay probate and expenses, and the other to receive and hold assets and their eventual distribution to beneficiaries. I've used the deceased's bank for this purpose.
2. Get lots of copies of death certificates. Plenty are needed and almost always originals, and it helps momentum if you're not waiting for originals to be returned so you can send them to other parties.
3. Always keep pristine comprehensive records especially of all financials. You'll need to ensure that these show all expenses including minor items such as postage all of which mount up and you should not be paying for these yourself.
4. I've always found banks willing to meet the funeral costs ahead of probate so you can get this bill paid out of one of your two bank accounts.
5. Once you are confident that you have discovered all assets and had them valued, and you know all the liabilities, you can move on to get probate. I have found the most tiresome assets to establish full details for are share holdings if there are any, but it has to be done.
6. Probate costs and IHT can be paid out of one of your established bank accounts.
7. Once probate has been obtained you should move as fast as possible to get the assets into your accounts and also pay off all liabilities of administration as executor.
8. Prepare the accounts in draft form. No need to be worried about this as they are reasonably straightforward and there's lots of specimens/examples available.
9. You should also move quickly to disperse net assets according to the Will. By the way, try and avoid telling beneficiaries what they may receive until after probate: if you get it wrong they will not be happy!
10. And finally, if there are any bequests etc to charities, NEVER tell them in advance. I made that mistake once when two charities were involved and they phoned me every day demanding progress updates, telling me I was too slow, and wanting all the time details of both the amount they would get and when I will pay it. I learned a lot about the "other side" of charities during this experience!
R.
Great list!I have done all "by the book", by which I mean I purchased an excellent book on the subject with lots of good practical advice (can't remember the book title), set up an action plan and then followed that through. Points to note:
1. I have always set up two executor's bank accounts, one for the loan to pay probate and expenses, and the other to receive and hold assets and their eventual distribution to beneficiaries. I've used the deceased's bank for this purpose.
2. Get lots of copies of death certificates. Plenty are needed and almost always originals, and it helps momentum if you're not waiting for originals to be returned so you can send them to other parties.
3. Always keep pristine comprehensive records especially of all financials. You'll need to ensure that these show all expenses including minor items such as postage all of which mount up and you should not be paying for these yourself.
4. I've always found banks willing to meet the funeral costs ahead of probate so you can get this bill paid out of one of your two bank accounts.
5. Once you are confident that you have discovered all assets and had them valued, and you know all the liabilities, you can move on to get probate. I have found the most tiresome assets to establish full details for are share holdings if there are any, but it has to be done.
6. Probate costs and IHT can be paid out of one of your established bank accounts.
7. Once probate has been obtained you should move as fast as possible to get the assets into your accounts and also pay off all liabilities of administration as executor.
8. Prepare the accounts in draft form. No need to be worried about this as they are reasonably straightforward and there's lots of specimens/examples available.
9. You should also move quickly to disperse net assets according to the Will. By the way, try and avoid telling beneficiaries what they may receive until after probate: if you get it wrong they will not be happy!
10. And finally, if there are any bequests etc to charities, NEVER tell them in advance. I made that mistake once when two charities were involved and they phoned me every day demanding progress updates, telling me I was too slow, and wanting all the time details of both the amount they would get and when I will pay it. I learned a lot about the "other side" of charities during this experience!
R.
L1OFF said:
Jasey_ said:
On the solicitor front we had a estimated price agreement when my dad died and the charged my mum 3 times the agreed amount despite the complexity of the estate not changing from his original estimate.
So when my mum died I did it myself.
Daunting at the start but actually quite straight forward provided you are methodical.
I handled this for my late Mum. Not difficult really. charged my mum 3 times the agreed amount despite the complexity of the estate not changing from his original estimate.So when my mum died I did it myself.
Daunting at the start but actually quite straight forward provided you are methodical.
In essence: a fair bit of paperwork, a bit of legwork, but not rocket science to a logical and methodical person.
I guess if you know the solicitor and know they won't 'uplift' their 'estimate', then it is an option, but I do feel this kind of thing is slightly open to potential abuse by those professionals!
littlebasher said:
Daunting or what!
My wife seems to think this would be dealt with in weeks, i've had to give her a steer on that.
Two executors, my Wife and my late FIL long term lady friend
He's long since divorced, so can't uplift the £325K threshold. The house is to be sold and the proceeds split between 7 parties named in the will (Lions share going to my Wife)
House i reckon will be valued at £375K
£20K cash in bank
£5K savings bond due to mature next month
Contents negligiable, but i suspect will round up to about £3K
£62K Mortgage
£5K funeral costs (ish)
So puts us over by about £13K (so IHT can be paid out of the cash he already holds)
Of course, the Estate agents could value it less (identical house sold earlier this year opposite for £375K, our one needs modernising !)
Lots to think about and i appreciate all the comments
It will not be dealt with in weeks, my M-I-L died early Dec 2018 and even thought wasn't that complicated in the big scheme of things (foreign bank account is a bit of hassle) the rebate from HMRC for over paid IHT only came back last week. The house did take a fair while to sell, so I'd set expectations for the timescale to be up to 2 years, as some will be chomping at the bit for their share.My wife seems to think this would be dealt with in weeks, i've had to give her a steer on that.
Two executors, my Wife and my late FIL long term lady friend
He's long since divorced, so can't uplift the £325K threshold. The house is to be sold and the proceeds split between 7 parties named in the will (Lions share going to my Wife)
House i reckon will be valued at £375K
£20K cash in bank
£5K savings bond due to mature next month
Contents negligiable, but i suspect will round up to about £3K
£62K Mortgage
£5K funeral costs (ish)
So puts us over by about £13K (so IHT can be paid out of the cash he already holds)
Of course, the Estate agents could value it less (identical house sold earlier this year opposite for £375K, our one needs modernising !)
Lots to think about and i appreciate all the comments
Unless in good condition probate sales for houses are often quite a bit lower than for a normal sale.
mikeiow said:
Oh yes, on the topic of timeframe....I think it took about 6 months to “sort out” my mums relatively simple affairs over 25 years ago. In these Covid times, I can easily imagine things rolling on up to a year.
We started on my mothers in April. Again, very simple affairs. Still ongoing...Gassing Station | Finance | Top of Page | What's New | My Stuff