Another IHT query
Discussion
The wife of a relative of mine passed away a couple of years ago. He owns a property worth approximately £450k, this has always been in his name rather than joint names. Am I correct in thinking that
1. Because the property was in his name only he can't utilise his wife's Residence Nil Rate Band allowance?
2. As long as his TOTAL assets are below £500k he shouldn't have any IHT to pay?
Thanks for all advice.
1. Because the property was in his name only he can't utilise his wife's Residence Nil Rate Band allowance?
2. As long as his TOTAL assets are below £500k he shouldn't have any IHT to pay?
Thanks for all advice.
Countdown said:
The wife of a relative of mine passed away a couple of years ago. He owns a property worth approximately £450k, this has always been in his name rather than joint names. Am I correct in thinking that
1. Because the property was in his name only he can't utilise his wife's Residence Nil Rate Band allowance?
2. As long as his TOTAL assets are below £500k he shouldn't have any IHT to pay?
Thanks for all advice.
Iirc he can still utilise the unused portion of his wife's NRB although if his total assets are less than £500k anyway then no IHT would be due in any case -£325k allowance plus the £175k house NRB.1. Because the property was in his name only he can't utilise his wife's Residence Nil Rate Band allowance?
2. As long as his TOTAL assets are below £500k he shouldn't have any IHT to pay?
Thanks for all advice.
Fwiw I have nearly finished dealing with a relatives probate and managed to get her husbands "unused " allowances ( not all ) and with help from my solicitor, from his death over 45 years ago !
alscar said:
Iirc he can still utilise the unused portion of his wife's NRB although if his total assets are less than £500k anyway then no IHT would be due in any case -£325k allowance plus the £175k house NRB.
Fwiw I have nearly finished dealing with a relatives probate and managed to get her husbands "unused " allowances ( not all ) and with help from my solicitor, from his death over 45 years ago !
Thanks Alscar - if he's allowed to utilise the property NRB I assume he's also allowed to use the £325k for other assets?Fwiw I have nearly finished dealing with a relatives probate and managed to get her husbands "unused " allowances ( not all ) and with help from my solicitor, from his death over 45 years ago !
Countdown said:
Thanks Alscar - if he's allowed to utilise the property NRB I assume he's also allowed to use the £325k for other assets?
Yup - everyone gets the £325k and then the £175k is only iro the house.The one nuance to this is that if the house is not left to a direct relation ( wife ,child etc ) then the NRB allowance is not allowed.
Also and not applicable here also if the entire estate is over £2m then a portion of the NRB is then tapered away on a matrix basis until zero remains of it ie at £2.35m.
Sobering thought that on £ 500k if "only" £ 325k was allowable the IHT bill at 40% is £ 70k !
alscar said:
Yup - everyone gets the £325k and then the £175k is only iro the house.
The one nuance to this is that if the house is not left to a direct relation ( wife ,child etc ) then the NRB allowance is not allowed.
Also and not applicable here also if the entire estate is over £2m then a portion of the NRB is then tapered away on a matrix basis until zero remains of it ie at £2.35m.
Sobering thought that on £ 500k if "only" £ 325k was allowable the IHT bill at 40% is £ 70k !
Thanks again - that will be a relief to his two sons The one nuance to this is that if the house is not left to a direct relation ( wife ,child etc ) then the NRB allowance is not allowed.
Also and not applicable here also if the entire estate is over £2m then a portion of the NRB is then tapered away on a matrix basis until zero remains of it ie at £2.35m.
Sobering thought that on £ 500k if "only" £ 325k was allowable the IHT bill at 40% is £ 70k !
If my memory is correct..
If the house is valued below the joint £350k allowance then I don't think that any unused allowance can be moved over to boost the personal allowance.
So if a house is worth around £250k, you loose the unused £100k. You can't add it to the £650k joint personal allowance.
So when folk say that a married couple wont pay IHT unless their estate is above £1m, they aren't necessarily correct.
If the house is valued below the joint £350k allowance then I don't think that any unused allowance can be moved over to boost the personal allowance.
So if a house is worth around £250k, you loose the unused £100k. You can't add it to the £650k joint personal allowance.
So when folk say that a married couple wont pay IHT unless their estate is above £1m, they aren't necessarily correct.
The Gauge said:
If my memory is correct..
If the house is valued below the joint £350k allowance then I don't think that any unused allowance can be moved over to boost the personal allowance.
So if a house is worth around £250k, you loose the unused £100k. You can't add it to the £650k joint personal allowance.
So when folk say that a married couple wont pay IHT unless their estate is above £1m, they aren't necessarily correct.
In Countdowns example it makes no difference but I agree with your last line. If the house is valued below the joint £350k allowance then I don't think that any unused allowance can be moved over to boost the personal allowance.
So if a house is worth around £250k, you loose the unused £100k. You can't add it to the £650k joint personal allowance.
So when folk say that a married couple wont pay IHT unless their estate is above £1m, they aren't necessarily correct.
The NRB is up to £175k so if the jointly owned house was worth that £250k , £175k would be passable on effectively first death and then only £75k eligible.
Not sure quite how this works though if there is a big difference between first and second deaths in value terms - I guess slightly more than £250k ?
In theory all things being equal max IHT allowance therefore £ 900,000.
I think.
I don't think I disagree with any of the above but just to make sure I understand
Wife passed away 12 months ago, no will and (for the purposes of this discussion) no assets in her own name
Husband owns a house worth somewhere between £400k and £500k
Husband owns commercial property worth £350k
My understanding is using the above fictional figures
1. he can leave the full value of the house to his kids using a combination of the £350k RNRB plus £150k out of the £650k combined allowance for other assets
2. That leaves £500k of "Other assets allowance" so he can also leave his £350k to his kids/grandkids/18yo girlfriend
Does that sound correct?
Wife passed away 12 months ago, no will and (for the purposes of this discussion) no assets in her own name
Husband owns a house worth somewhere between £400k and £500k
Husband owns commercial property worth £350k
My understanding is using the above fictional figures
1. he can leave the full value of the house to his kids using a combination of the £350k RNRB plus £150k out of the £650k combined allowance for other assets
2. That leaves £500k of "Other assets allowance" so he can also leave his £350k to his kids/grandkids/18yo girlfriend
Does that sound correct?
Countdown said:
1. he can leave the full value of the house to his kids using a combination of the £350k RNRB plus £150k out of the £650k combined allowance for other assets
I don't think that last bit is correct. Once the house allowance is used up, then no other allowance can be applied to any remaining value of the house. The £650k 'other assets' is for exactly that - assets other than the house.Hopefully I am wrong, but I don't think I am
The Gauge said:
Countdown said:
1. he can leave the full value of the house to his kids using a combination of the £350k RNRB plus £150k out of the £650k combined allowance for other assets
I don't think that last bit is correct. Once the house allowance is used up, then no other allowance can be applied to any remaining value of the house. The £650k 'other assets' is for exactly that - assets other than the house.Hopefully I am wrong, but I don't think I am
I'll add my experience having just put my dads estate through probate (grant issued today!).
I decided to go DIY with probate because a rogue solicitor took advantage of us when my uncle died. Dad's estate seemed straightforward and the probate forms fairly easy to navigate. And mostly it's been fine. The value of his estate was over 325k but under 500k and he has left his small flat to me and my brother. I could have claimed mum's unused NRB as she passed 11 years ago but because the value was under 500k I chose not to in order to keep things simple. In hindsight I should've claimed it as it appears to be nothing more than a tick box on the form. Anyway, here's what went slightly wrong...
I ran the estate through the HMRC calculator and it came back as no IHT due as expected. So I submitted the probate form. But the process was delayed when the probate service said I needed to fill on IHT400. This was because it was over 325k and in order to claim RNRB it appears you need to fill in the long form. All worked out fine in the end and probably delayed it by no more than a month. But it sounds like OP is in a similar situation. When applying for probate DO claim deceased spouse unused NRB as this gives you 650k allowance which covers everything. If not, you will need to submit IHT400.
What I have learned is that solicitors take the pxxx. They will take thousands for doing very little and if the estate is simple, as in a property and a bit of cash, then you can absolutely do probate without using them.
I decided to go DIY with probate because a rogue solicitor took advantage of us when my uncle died. Dad's estate seemed straightforward and the probate forms fairly easy to navigate. And mostly it's been fine. The value of his estate was over 325k but under 500k and he has left his small flat to me and my brother. I could have claimed mum's unused NRB as she passed 11 years ago but because the value was under 500k I chose not to in order to keep things simple. In hindsight I should've claimed it as it appears to be nothing more than a tick box on the form. Anyway, here's what went slightly wrong...
I ran the estate through the HMRC calculator and it came back as no IHT due as expected. So I submitted the probate form. But the process was delayed when the probate service said I needed to fill on IHT400. This was because it was over 325k and in order to claim RNRB it appears you need to fill in the long form. All worked out fine in the end and probably delayed it by no more than a month. But it sounds like OP is in a similar situation. When applying for probate DO claim deceased spouse unused NRB as this gives you 650k allowance which covers everything. If not, you will need to submit IHT400.
What I have learned is that solicitors take the pxxx. They will take thousands for doing very little and if the estate is simple, as in a property and a bit of cash, then you can absolutely do probate without using them.
Countdown said:
I don't think I disagree with any of the above but just to make sure I understand
Wife passed away 12 months ago, no will and (for the purposes of this discussion) no assets in her own name
Husband owns a house worth somewhere between £400k and £500k
Husband owns commercial property worth £350k
My understanding is using the above fictional figures
1. he can leave the full value of the house to his kids using a combination of the £350k RNRB plus £150k out of the £650k combined allowance for other assets
2. That leaves £500k of "Other assets allowance" so he can also leave his £350k to his kids/grandkids/18yo girlfriend
Does that sound correct?
If wife died intestate then can still leave the NRB £175k allowance to her husband providing she has some percentage of house ownership. Wife passed away 12 months ago, no will and (for the purposes of this discussion) no assets in her own name
Husband owns a house worth somewhere between £400k and £500k
Husband owns commercial property worth £350k
My understanding is using the above fictional figures
1. he can leave the full value of the house to his kids using a combination of the £350k RNRB plus £150k out of the £650k combined allowance for other assets
2. That leaves £500k of "Other assets allowance" so he can also leave his £350k to his kids/grandkids/18yo girlfriend
Does that sound correct?
If she doesn’t have then tbh on this point I’m not 100%.
Husbands house when he dies therefore either gets the NRB £ 175k in his name if left to kids etc plus wife’s if applicable.
He has the full IHT £ 325k allowance as does his late wife irrespective of her dying intestate and / or whether or not she owned assets.
The NRB is simply additional allowance iro primary home ownership.
As I said earlier when I did probate for my aunt we managed to get a decent amount of unused allowances cf from her husbands death 45 years earlier.
I had already sold her house to pay for her care home costs but remember talking to the solicitor who helped enormously in getting this about the NRB and she said that if the house was being left to her children she would be able to get some of that NRB also cf.
@Chris, well done on sorting probate and sorry about your Dad.
You are quite right in that if the affairs are simple then diy is very doable.
Having been Executor a number of times ( both diy and with the aid of a solicitor ) would just add a few points.
1) You can still do all the heavy lifting but employ a solicitor on a menu basis for certain tasks at a contracted price.
2) As in my posts previously obtaining unused IHT allowances from years ago from someone who died intestate would have been really hard work and take up a lot of work to achieve what my solicitor did.
This saved the estate £80k in IHT alone.
3) If royalties are involved then good luck to anyone doing that diy !
4) When my MIL died I did the high level sums and some lifting for my FIL but he didn’t want to file the probate online ( he doesn’t do online transactional stuff ) so got his solicitor to plus a few other things .He paid £3k in total on an estate which was over £1m.
You are quite right in that if the affairs are simple then diy is very doable.
Having been Executor a number of times ( both diy and with the aid of a solicitor ) would just add a few points.
1) You can still do all the heavy lifting but employ a solicitor on a menu basis for certain tasks at a contracted price.
2) As in my posts previously obtaining unused IHT allowances from years ago from someone who died intestate would have been really hard work and take up a lot of work to achieve what my solicitor did.
This saved the estate £80k in IHT alone.
3) If royalties are involved then good luck to anyone doing that diy !
4) When my MIL died I did the high level sums and some lifting for my FIL but he didn’t want to file the probate online ( he doesn’t do online transactional stuff ) so got his solicitor to plus a few other things .He paid £3k in total on an estate which was over £1m.
We have just completed the IHT procedure ourselves, though it wasn't easy answering some of their ambiguous questions. My mums estate had complications but we got there in the end, and received a code from them to confirm that IHT had been paid and giving permission to continue with probate/Letters of Administration.
We have submitted the probate papers ourselves and received confirmation of receipt, and we are now awaiting a further response. Probate is complicated by the original will being stolen and with only a photocopy available, so she effectively died intestate. It will be interesting to see how they handle that.
Thankfully the will left everything to her children, and with there being no spouse or other close living relatives then the outcome shouldn't be affected, just the journey to get to that outcome.
Children/Descendants: If no spouse survives, children inherit everything equally. If a child has died, their children (grandchildren) inherit that share.
We have submitted the probate papers ourselves and received confirmation of receipt, and we are now awaiting a further response. Probate is complicated by the original will being stolen and with only a photocopy available, so she effectively died intestate. It will be interesting to see how they handle that.
Thankfully the will left everything to her children, and with there being no spouse or other close living relatives then the outcome shouldn't be affected, just the journey to get to that outcome.
Children/Descendants: If no spouse survives, children inherit everything equally. If a child has died, their children (grandchildren) inherit that share.
Edited by The Gauge on Friday 13th February 08:52
alscar said:
If wife died intestate then can still leave the NRB £175k allowance to her husband providing she has some percentage of house ownership.
If she doesn t have then tbh on this point I m not 100%.
Yes this is the bit I'm a little confused about.If she doesn t have then tbh on this point I m not 100%.
However assuming the residence NRB doesn't transfer over it looks like he might be ok with £325k + £325k + £175k
Always a bit perplexed by the inconsistency of ownership here. The way look at it; if you ve been married for nn years and get divorced then the property is split 50/50 in a settlement of matrimonial assets regardless what the deeds say.
Ergo why does it not automatically apply for IHT purposes too?
Ergo why does it not automatically apply for IHT purposes too?
Edited by HarryW on Friday 13th February 12:50
Countdown said:
Yes this is the bit I'm a little confused about.
However assuming the residence NRB doesn't transfer over it looks like he might be ok with £325k + £325k + £175k
From the HMRC website. However assuming the residence NRB doesn't transfer over it looks like he might be ok with £325k + £325k + £175k
Sounds like actually in your example the wife would be able to transfer the full £175k irrespective of not owning providing the following stated conditions were met.
However also all academic in your example as the £825k total allowance appears sufficient.
Any residence nil rate band (RNRB) that’s not used when someone dies can go to their spouse or civil partner’s estate when they die. This transfer can also happen if the first of the couple died before 6 April 2017, even though the residence nil rate band was not available at that time.
The residence nil rate band and any transferred residence allowance is available if the surviving spouse or civil partner:
leaves a home to their direct descendants
includes the home in their estate
Homes that qualify
The home that the surviving spouse or civil partner leaves to their direct descendants does not have to be the same home that they lived in with their partner to either qualify for the residence nil rate band or to transfer it.
They do not have to have previously owned the home with their late partner, or inherited it from them. It can be any home as long as both these conditions are met:
the surviving spouse or civil partner lived in it at some stage before they died
the home is included in their estate.
Countdown said:
Thanks again Alscar - much appreciated
No worries - I’m obviously no solicitor but I’m pretty sure I’m right.If your relative needs any help on operating LPA’s and indeed setting probate where Music Royalties are concerned ( in particular valuing their worth for probate purposes ) I’ve had to learn a lot about both !
Gassing Station | Finance | Top of Page | What's New | My Stuff