IHT query

[TTmonkey]

FiLs estate grosses at approx 328k. Just over IHT threshold. So the lawyer says we need to do a load of paperwork for HMRC before probate and that IH tax will need to be paid.

But the estate owes some money to cover debts outstanding… about 7k for funeral and other costs and some other debts payable by the estate.

So eventually the estate will net less than £325k for the beneficiaries. This being under IHT.

Is it right that these debts are being ignored and not settled before probate is applied for, and therefore this whole extra time and effort for the HMRC is a mistake? And the estate is effectively being over stated on the wrong side of the IHT threshold?


Additionally, how much tax will be payable….?

Thanks in advance….

[Happy Jim]

You pay IHT on the estate value that is over £325k after all debts are cleared, even if there is no IHT to pay you would still have to report it to HMRC. IHT rate is 40%. So if the estate does finish at £328k then £3k is liable to IHT (£1200 tax), tax payable by the estate with the residue being distributed as per the will.

Cheers
Jim

[TTmonkey]

Happy Jim said:

You pay IHT on the estate value that is over £325k after all debts are cleared, even if there is no IHT to pay you would still have to report it to HMRC. IHT rate is 40%. So if the estate does finish at £328k then £3k is liable to IHT (£1200 tax), tax payable by the estate with the residue being distributed as per the will.

Cheers
Jim

After all debts. The solicitor seems to have missed this point…. There’s probably 7k in bills to be paid yet. So the total after this should be below 325k.

[Simpo Two]

Swap him for an accountant? Or maybe do it yourself and save a few K and loads of time.

[rattyuk2000]

Threshold is also not a hard £325K, it can increase if there's property as part of the estate.

[Burwood]

rattyuk2000 said:

Threshold is also not a hard £325K, it can increase if there's property as part of the estate.

Correct. Nil Bank rate £325k PLUS a possible £175k relating to primary residence if passed to immediate family, children (incl adopted), grand children and of course, spouse.

[Burwood]

Simpo Two said:

Swap him for an accountant? Or maybe do it yourself and save a few K and loads of time.

This all day long. Do it yourself, it's easy

[TTmonkey]

Burwood said:

rattyuk2000 said:

Threshold is also not a hard £325K, it can increase if there's property as part of the estate.

Correct. Nil Bank rate £325k PLUS a possible £175k relating to primary residence if passed to immediate family, children (incl adopted), grand children and of course, spouse.

There is a home, being sold, proceeds to the children and grandchildren (although they don’t live in the house). Does this still qualify?

[TTmonkey]

Burwood said:

This all day long. Do it yourself, it's easy

It wasn’t my decision.

[mikeiow]

Sorry for the loss, OP.
I assume the MiL has already passed? Otherwise, things mostly move across with little hassle.

Burwood said:

Simpo Two said:

Swap him for an accountant? Or maybe do it yourself and save a few K and loads of time.

This all day long. Do it yourself, it's easy

I’d agree with DIY’ing….but I’d question whether is is “easy”: it depends a little on how organised you are with dealing with paperwork.

It is straightforward enough, but can take time and need visits to banks, etc.

I dealt with my parents many years ago; wife dealt with her Dads relatively recently (which was less hassle since it went to her mum, & all accounts happily transferred without any need for probate)….she will have her mum’s at some point in the years ahead, which will take longer.
Weird thing she found was that premium bonds need to be sorted (cashed in) within 12 months: her dad was still picking up £25 or £50 wins almost a year after passing: being a good Scot, that would have appealed to him!

Good luck OP, it certainly sounds like your solicitor is a bit crap!

[Burwood]

TTmonkey said:

Burwood said:

rattyuk2000 said:

Threshold is also not a hard £325K, it can increase if there's property as part of the estate.

Correct. Nil Bank rate £325k PLUS a possible £175k relating to primary residence if passed to immediate family, children (incl adopted), grand children and of course, spouse.

There is a home, being sold, proceeds to the children and grandchildren (although they don’t live in the house). Does this still qualify?

Yes it does apply. He may have some allowances passed on to him by his spouse?

Bottom line if a House involved and it's passing to direct relatives(children/grand children) then he absolutely has more than £325K total allowance.

[TTmonkey]

Burwood said:

TTmonkey said:

Burwood said:

rattyuk2000 said:

Threshold is also not a hard £325K, it can increase if there's property as part of the estate.

Correct. Nil Bank rate £325k PLUS a possible £175k relating to primary residence if passed to immediate family, children (incl adopted), grand children and of course, spouse.

There is a home, being sold, proceeds to the children and grandchildren (although they don’t live in the house). Does this still qualify?

Yes it does apply. He may have some allowances passed on to him by his spouse?

Bottom line if a House involved and it's passing to direct relatives(children/grand children) then he absolutely has more than £325K total allowance.

Thanks for that clear statement. This is totally the case then.

[TTmonkey]

mikeiow said:

Sorry for the loss, OP.
I assume the MiL has already passed? Otherwise, things mostly move across with little hassle.

Burwood said:

Simpo Two said:

Swap him for an accountant? Or maybe do it yourself and save a few K and loads of time.

This all day long. Do it yourself, it's easy

I’d agree with DIY’ing….but I’d question whether is is “easy”: it depends a little on how organised you are with dealing with paperwork.

It is straightforward enough, but can take time and need visits to banks, etc.

I dealt with my parents many years ago; wife dealt with her Dads relatively recently (which was less hassle since it went to her mum, & all accounts happily transferred without any need for probate)….she will have her mum’s at some point in the years ahead, which will take longer.
Weird thing she found was that premium bonds need to be sorted (cashed in) within 12 months: her dad was still picking up £25 or £50 wins almost a year after passing: being a good Scot, that would have appealed to him!

Good luck OP, it certainly sounds like your solicitor is a bit crap!

Thanks for reply. Yes the MiL passed several years ago. Very sad and untimely. The FiL has been ‘dying’ for twenty years so took us all by surprise by actually doing so about 6 weeks ago.

We should have dealt with it ourselves, I sorted my own fathers passing away myself so had some experience. But we wanted the solicitor because my wife’s brother can be awkward to deal with and wanted to be able to point at a qualified person for all this should he have kicked up any fuss.

It’s important to the family to get this done and dusted ASAP. My wife has been diagnosed with cancer in the last two weeks (since just after the funeral in fact), and faces a terrible battle over the next year, so having this behind us would be comforting.


Thanks all for replies so far. I think he has questions to answer.

[Burwood]

TTmonkey said:

mikeiow said:

Sorry for the loss, OP.
I assume the MiL has already passed? Otherwise, things mostly move across with little hassle.

Burwood said:

Simpo Two said:

Swap him for an accountant? Or maybe do it yourself and save a few K and loads of time.

This all day long. Do it yourself, it's easy

I’d agree with DIY’ing….but I’d question whether is is “easy”: it depends a little on how organised you are with dealing with paperwork.

It is straightforward enough, but can take time and need visits to banks, etc.

I dealt with my parents many years ago; wife dealt with her Dads relatively recently (which was less hassle since it went to her mum, & all accounts happily transferred without any need for probate)….she will have her mum’s at some point in the years ahead, which will take longer.
Weird thing she found was that premium bonds need to be sorted (cashed in) within 12 months: her dad was still picking up £25 or £50 wins almost a year after passing: being a good Scot, that would have appealed to him!

Good luck OP, it certainly sounds like your solicitor is a bit crap!

Thanks for reply. Yes the MiL passed several years ago. Very sad and untimely. The FiL has been ‘dying’ for twenty years so took us all by surprise by actually doing so about 6 weeks ago.

We should have dealt with it ourselves, I sorted my own fathers passing away myself so had some experience. But we wanted the solicitor because my wife’s brother can be awkward to deal with and wanted to be able to point at a qualified person for all this should he have kicked up any fuss.

It’s important to the family to get this done and dusted ASAP. My wife has been diagnosed with cancer in the last two weeks (since just after the funeral in fact), and faces a terrible battle over the next year, so having this behind us would be comforting.


Thanks all for replies so far. I think he has questions to answer.

Sorry to hear about your wife, TT. All the best with her treatment. Assuming MIL passed her estate to her spouse then if 'several years ago the Residential nil band rates were introduced in 2017 and was 150 then 175k. But even if she passed prior to 2015, your FIL still has £325+£175! Good luck

[GliderRider]

TT Monkey, if you print off the IHT205, which needs to be completed to tell HMRC about the FiL's estate, and fill it out yourself, it will give you a pretty good idea of the situation. start of IHT205 process

There is also a set of notes for filling it out here: IHT205 Notes

[uknick]

Burwood said:

Sorry to hear about your wife, TT. All the best with her treatment. Assuming MIL passed her estate to her spouse then if 'several years ago the Residential nil band rates were introduced in 2017 and was 150 then 175k. But even if she passed prior to 2015, your FIL still has £325+£175! Good luck

Not quite right. Any of the wife's £325k nil rate band not used for her estate goes to the surviving spouse. Based on what has been said it does look like the FIL's estate should get at least £650K (his and her NRB allowance) + £175k (for home). This figure assume no PETs are in existence.

As the estate appears to be well below the IHT threshold, I'd second what has been said and try to complete the IHT205 first and then decide if you really need to pay for professional help. If you do, only use a solicitor if they are a STEP member, Society of Trust and Estate Practitioners. If they're not they will more than likely just sub contract the IHT work to an accountant anyway.

[Burwood]

uknick said:

Burwood said:

Sorry to hear about your wife, TT. All the best with her treatment. Assuming MIL passed her estate to her spouse then if 'several years ago the Residential nil band rates were introduced in 2017 and was 150 then 175k. But even if she passed prior to 2015, your FIL still has £325+£175! Good luck

Not quite right. Any of the wife's £325k nil rate band not used for her estate goes to the surviving spouse. Based on what has been said it does look like the FIL's estate should get at least £650K (his and her NRB allowance) + £175k (for home). This figure assume no PETs are in existence.

As the estate appears to be well below the IHT threshold, I'd second what has been said and try to complete the IHT205 first and then decide if you really need to pay for professional help. If you do, only use a solicitor if they are a STEP member, Society of Trust and Estate Practitioners. If they're not they will more than likely just sub contract the IHT work to an accountant anyway.

Yes, quite right, I got side tracked with the RNRB

[Simpo Two]

uknick said:

Burwood said:

Sorry to hear about your wife, TT. All the best with her treatment. Assuming MIL passed her estate to her spouse then if 'several years ago the Residential nil band rates were introduced in 2017 and was 150 then 175k. But even if she passed prior to 2015, your FIL still has £325+£175! Good luck

Not quite right. Any of the wife's £325k nil rate band not used for her estate goes to the surviving spouse. Based on what has been said it does look like the FIL's estate should get at least £650K (his and her NRB allowance) + £175k (for home). This figure assume no PETs are in existence.

As the estate appears to be well below the IHT threshold, I'd second what has been said and try to complete the IHT205 first and then decide if you really need to pay for professional help. If you do, only use a solicitor if they are a STEP member, Society of Trust and Estate Practitioners. If they're not they will more than likely just sub contract the IHT work to an accountant anyway.

The original solicitor is looking incompetent to say the least, yet still charging handsomely no doubt.

[uknick]

Simpo Two said:

The original solicitor is looking incompetent to say the least, yet still charging handsomely no doubt.

It's a UK professional. Why would you expect anything else?

[Simpo Two]

uknick said:

Simpo Two said:

The original solicitor is looking incompetent to say the least, yet still charging handsomely no doubt.

It's a UK professional. Why would you expect anything else?

But really, how can they be charging to manage an estate and NOT know about the double IHT allowance? It beggars belief.