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Potential IHT calculation
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misterthrifty
Posts: 492 Forumite
in Cutting tax
Hi
I help my mother with her finances including potential IHT. I'm aware that unused nil rate allowance from a deceased spouse can now be transferred to the surviving spouse but I'm not sure how this works and, I suspect, it's more complicated than that!
My father died about 15 years ago and left his estate, about £200,000 then, to my mother. Her estate is now worth approx £450,000 which she is leaving to my brother and myself.
How would the IHT rules apply and how would I calculate the value of the unused nil rate?
TIA
Mr T
I help my mother with her finances including potential IHT. I'm aware that unused nil rate allowance from a deceased spouse can now be transferred to the surviving spouse but I'm not sure how this works and, I suspect, it's more complicated than that!
My father died about 15 years ago and left his estate, about £200,000 then, to my mother. Her estate is now worth approx £450,000 which she is leaving to my brother and myself.
How would the IHT rules apply and how would I calculate the value of the unused nil rate?
TIA
Mr T
0
Comments
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Hi Misterthrifty,
As your father left his entire estate to your mother, your mother is entitled to an uplift of 100% of your father's nil rate band allowance.
Therefore if she dies in this tax year she will be entitled to leave £300,000 x 2 and if she dies in the next tax year it will be £312,000 x 2 and so on. Therefore, as things stand there will be no IHT to pay when your mother dies.
In order to claim the uplift in the nil rate band, Revenue and Customs will want to see various documents concerning your father.
These are: 1) A copy of IHT 200, IHT205 or full written details of the assets, 2) Death Certificate, 3) Marriage Certificate, 4) copy of the Will, 5) copy of the Grant of Representation, 6) details of gifts made in the 7 years before death, and 7) Valuations of any assets that passed to beneficiaries other than spouse.
Since he died some time ago, I would advise that you locate as much paperwork as possible in advance so that your task is made a little easier when the time comes to claim this allowance.[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 -
Thanks, that is very helpful .I had heard that that indexation would apply from the time my father died, I'm not sure if that was on his estate or his nil rate band at that time?
I presume 1/ is the declaration of his assets that his executor made? 3/ is the return made by the executor?
You are right, this could be difficult to put together after my mothers death so I will discuss it with her.
Thanks again!0 -
It will be the percentage of the unused nil rate band that you can claim, based on the prevailing rate in force when your mother dies.
So if your father made no other gifts to anybody else apart from your mother, you will be able to 'uplift' her nil rate band by 100%.
A useful starting point is obtaining a copy of the will (and other documentation if possible) from the Probate Registry[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
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