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Inheritance - divvying up the estate of Mr Dog
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The way I would tackle this issue is as follows:
- Work out the gross value of the estate at the date of death.
- pay the debts (phone bill, income tax, funeral bill etc)
- deduct the value of the debts from the gross estate - leaving the net estate.
The first specific/pecuniary gifts that haven't failed (unless the will says otherwise) get their gifts free of IHT - ie they get exactly what the Will says.
Whatever is left over is divided between the residuary beneficiaries in the shares specified - including those that get the intestate parts. Remember IHT is levied on the estate, and unless we get into a grossing up scenario (ie the specific and pecuniary gifts exceed the nil rate band) the calculation should be relatively straightforward.
Not necessarily- the testator can stipulate that every pecuniary legacy is to pay its own proportion of IHT- and that includes charitable bequests.0 -
John_Pierpoint wrote: »Anyone got any thoughts on my thread starter question:
Am I right in thinking there is a hierarchy for paying the debts and expenses but not the tax: All the debts & expenses before and after death come out of the intestate chunk of the estate and if this is not enough only then out of the residuary?, (and if that is still not enough only then off the specific bequests?)
John
Yes- secured creditors.0 -
RobS77 wrote:Not necessarily- the testator can stipulate that every pecuniary legacy is to pay its own proportion of IHT- and that includes charitable bequests.
Which is why I said in my post `The first specific/pecuniary gifts that haven't failed (unless the will says otherwise) get their gifts free of IHT`.[FONT="]Public wealth warning![/FONT][FONT="] It's not compulsory for solicitors or Willwriters to pass an exam in writing Wills - probably the most important thing you’ll ever sign.[/FONT]
[FONT="]Membership of the Institute of Professional Willwriters is acquired by passing an entrance exam and complying with an OFT endorsed code of practice, and I declare myself a member.[/FONT]0 -
RobS77 wrote:Not necessarily- the testator can stipulate that every pecuniary legacy is to pay its own proportion of IHT- and that includes charitable bequests.
...also gifts to registered charities are exempt from inheritance tax.[FONT="]Public wealth warning![/FONT][FONT="] It's not compulsory for solicitors or Willwriters to pass an exam in writing Wills - probably the most important thing you’ll ever sign.[/FONT]
[FONT="]Membership of the Institute of Professional Willwriters is acquired by passing an entrance exam and complying with an OFT endorsed code of practice, and I declare myself a member.[/FONT]0 -
Hi Rob and Localhero,
I did think of having a go at the retired solicitor - but decided that would just delay things further.
I think you might both be wrong about the order of payout, but I need to consult some more authoritative legal books than are available to me here in Essex.
Next time I'm going to London I will try Camden(Holborn)/Guild Hall/C-o-L Business library/read the books in the legal book shop;) and check my theory.
Back at the start of this process I did a similar check, and got excited about something called "hotchpot" that had be torn out of a reference book.
A bit more research proved it had been ripped out because it was obsolete:D0 -
Hotchpot clauses aren't obsolete- they are used where a testator has done a previous gift to one of the residuary legatees during their lifetime to equalise the residuary estate.0
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John_Pierpoint wrote: »Hi Rob and Localhero,
I did think of having a go at the retired solicitor - but decided that would just delay things further.
I think you might both be wrong about the order of payout, but I need to consult some more authoritative legal books than are available to me here in Essex.
Next time I'm going to London I will try Camden(Holborn)/Guild Hall/C-o-L Business library/read the books in the legal book shop;) and check my theory.
Back at the start of this process I did a similar check, and got excited about something called "hotchpot" that had be torn out of a reference book.
A bit more research proved it had been ripped out because it was obsolete:D
No- funeral bills are secured- and the costs of the estate!0 -
Just been looking at some more of your input, Rob. I am interested in these statements:... the testator can stipulate that every pecuniary legacy is to pay its own proportion of IHT- and that includes charitable bequests.Unless you stipulate that they are to bear their share of IHT- you can insert that in the administrative clauses.
Can you explain a bit more about these 'administrative clauses'?
Because the way I understand it, gifts to spouses, political parties, charities and other 'good causes' are exempt from IHT.
So if you want to make gifts to non exempt beneficiaries that are free of IHT - and thereby exempt beneficiaries receiving less - if we're not careful we can enter the realms of 'grossing up'.
That then produces the effect of slightly aggrieved charities but also more inheritance tax becoming due on the estate - not exactly great tax planning. :eek:
Please do enlighten me what you mean as I'm always 'keen to learn'.0
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