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  • FIRST POST
    • Asher
    • By Asher 6th Jul 17, 11:11 AM
    • 142Posts
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    Asher
    How to value the Estate
    • #1
    • 6th Jul 17, 11:11 AM
    How to value the Estate 6th Jul 17 at 11:11 AM
    Can somebody explain how an Estate is valued if the main asset is a house and it is owned by a father (now dead) and his two adult children?

    One of the children had Power of Attorney and was on a joint bank account, that's me. Father had dementia hence the Power of Attorney and joint bank account but I did not want to bear the burden of it all and so the house was put in all 3 names. If only 33% of the house has to be declared then it is under the threshold for IT. How do you say that when all you have is a little box to fill in.


Page 1
    • Yorkshireman99
    • By Yorkshireman99 6th Jul 17, 11:27 AM
    • 2,612 Posts
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    Yorkshireman99
    • #2
    • 6th Jul 17, 11:27 AM
    • #2
    • 6th Jul 17, 11:27 AM
    Can somebody explain how an Estate is valued if the main asset is a house and it is owned by a father (now dead) and his two adult children?

    One of the children had Power of Attorney and was on a joint bank account, that's me. Father had dementia hence the Power of Attorney and joint bank account but I did not want to bear the burden of it all and so the house was put in all 3 names. If only 33% of the house has to be declared then it is under the threshold for IT. How do you say that when all you have is a little box to fill in.


    Originally posted by Asher
    When was the house transferred? If it was done under the POA it is questionable if the transfer was legal since attorneys are not supposed to make any transactions that do not directly benefit the donor. In any case if the gift was made less than seven years before the death the value would be added back to the estate value for IHT purposes.
    • TonyMMM
    • By TonyMMM 6th Jul 17, 11:50 AM
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    TonyMMM
    • #3
    • 6th Jul 17, 11:50 AM
    • #3
    • 6th Jul 17, 11:50 AM
    Were the two children's shares willed to them from the mother - or was it transferred to them by the father or by the POA ? - when, why and how the ownership was split is very important.

    As above - if done under the POA it may be open to challenge.
    • Asher
    • By Asher 6th Jul 17, 12:28 PM
    • 142 Posts
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    Asher
    • #4
    • 6th Jul 17, 12:28 PM
    • #4
    • 6th Jul 17, 12:28 PM
    No not done under the Power of Attorney and it is less that 7 years since we did it. When mother died everything went to dad and we did not have to do anything with probate. She died almost two years ago.

    So am I right in thinking there will be some taper relief for a gift? Are we able to use mum's portion of IH tax allowance?

    So we have to use form 404 along side 400 am I right?

    I will have a look at all the paperwork and answer when I can but at work now so it is not handy.
    Last edited by Asher; 06-07-2017 at 12:31 PM.
    • Yorkshireman99
    • By Yorkshireman99 6th Jul 17, 1:23 PM
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    Yorkshireman99
    • #5
    • 6th Jul 17, 1:23 PM
    • #5
    • 6th Jul 17, 1:23 PM
    No not done under the Power of Attorney and it is less that 7 years since we did it. When mother died everything went to dad and we did not have to do anything with probate. She died almost two years ago.

    So am I right in thinking there will be some taper relief for a gift? Are we able to use mum's portion of IH tax allowance?

    So we have to use form 404 along side 400 am I right?

    I will have a look at all the paperwork and answer when I can but at work now so it is not handy.
    Originally posted by Asher
    It depends on exactly when the gift was done and to whom.You will need to sort probate or LOA for both parents. Without that information nobody can advise. AFAIK there is no taper relief in the circumstances. I thnk you need some paid for professional advice to unscamble things. In particular a professional valaution at the date of the gift and maybe at the dates of death as well.
    • Brighty
    • By Brighty 6th Jul 17, 3:54 PM
    • 650 Posts
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    Brighty
    • #6
    • 6th Jul 17, 3:54 PM
    • #6
    • 6th Jul 17, 3:54 PM
    If your parents were married and mum left everything to dad, then you can use her allowance, giving you a IHT limit of £650k on dads estate, if he died after April this year, there is also the new additional nil rate band on property of £100k each, which takes it up to £850k, assuming the property is being left to the children.

    There is taper relief on the 7yr rule regarding gifts
    https://www.gov.uk/inheritance-tax/gifts

    Years between gift and death Tax paid
    less than 3 40%
    3 to 4 32%
    4 to 5 24%
    5 to 6 16%
    6 to 7 8%
    7 or more 0%

    If the house was owned by your parents originally as joint tenants, then probate for mum shouldn't be required, land registry will just need probate for dad and a copy of mums death cert to transfer it into your names. Probate for mum will be required if they owned the house as tenants in common and it wasn't sorted out at the time.
    • Yorkshireman99
    • By Yorkshireman99 6th Jul 17, 4:30 PM
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    Yorkshireman99
    • #7
    • 6th Jul 17, 4:30 PM
    • #7
    • 6th Jul 17, 4:30 PM
    If your parents were married and mum left everything to dad, then you can use her allowance, giving you a IHT limit of £650k on dads estate, if he died after April this year, there is also the new additional nil rate band on property of £100k each, which takes it up to £850k, assuming the property is being left to the children.

    There is taper relief on the 7yr rule regarding gifts
    https://www.gov.uk/inheritance-tax/gifts

    Years between gift and death Tax paid
    less than 3 40%
    3 to 4 32%
    4 to 5 24%
    5 to 6 16%
    6 to 7 8%
    7 or more 0%

    If the house was owned by your parents originally as joint tenants, then probate for mum shouldn't be required, land registry will just need probate for dad and a copy of mums death cert to transfer it into your names. Probate for mum will be required if they owned the house as tenants in common and it wasn't sorted out at the time.
    Originally posted by Brighty
    Please can someone giv me a definitive answer re taper relief? I have been given conflicting answers. For example if A give B £85,000 in 2013 and dies in 2017 what taper relief if, any is given? TIA.
    • Brighty
    • By Brighty 6th Jul 17, 4:38 PM
    • 650 Posts
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    Brighty
    • #8
    • 6th Jul 17, 4:38 PM
    • #8
    • 6th Jul 17, 4:38 PM
    Please can someone giv me a definitive answer re taper relief? I have been given conflicting answers. For example if A give B £85,000 in 2013 and dies in 2017 what taper relief if, any is given? TIA.
    Originally posted by Yorkshireman99
    From the link above

    If IHT needs to be paid on the whole gift (i.e the estate is already at or over the IHT limit without including the gift) then in your example, rather than having to pay the full 40% IHT on the £85k, so £34k, as it's been 4 years you only pay 24%, so £20.4k. I assume it gets a bit trickier if the estate is under the limit without the gift, but the gift takes it over, i assume you would just pay 24% on whatever part of the gift was over the limit
    • Asher
    • By Asher 6th Jul 17, 4:43 PM
    • 142 Posts
    • 121 Thanks
    Asher
    • #9
    • 6th Jul 17, 4:43 PM
    • #9
    • 6th Jul 17, 4:43 PM
    If your parents were married and mum left everything to dad, then you can use her allowance, giving you a IHT limit of £650k on dads estate, if he died after April this year, there is also the new additional nil rate band on property of £100k each, which takes it up to £850k, assuming the property is being left to the children.

    There is taper relief on the 7yr rule regarding gifts
    https://www.gov.uk/inheritance-tax/gifts

    Years between gift and death Tax paid
    less than 3 40%
    3 to 4 32%
    4 to 5 24%
    5 to 6 16%
    6 to 7 8%
    7 or more 0%

    If the house was owned by your parents originally as joint tenants, then probate for mum shouldn't be required, land registry will just need probate for dad and a copy of mums death cert to transfer it into your names. Probate for mum will be required if they owned the house as tenants in common and it wasn't sorted out at the time.
    Originally posted by Brighty
    Many thanks BUT does the house have to be transferred fully into children's names? Can you just sell it as soon as the probate formalities are done and you get the grant of whatever it is called.

    What I mean is does the executor have to take ownership or can they just sell it without that interim step?
    • Brighty
    • By Brighty 6th Jul 17, 4:47 PM
    • 650 Posts
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    Brighty
    If selling, then no, you don't need to put it in your name, your conveyancing solicitor will just need the probate stuff
    • Yorkshireman99
    • By Yorkshireman99 6th Jul 17, 8:07 PM
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    Yorkshireman99
    From the link above

    If IHT needs to be paid on the whole gift (i.e the estate is already at or over the IHT limit without including the gift) then in your example, rather than having to pay the full 40% IHT on the £85k, so £34k, as it's been 4 years you only pay 24%, so £20.4k. I assume it gets a bit trickier if the estate is under the limit without the gift, but the gift takes it over, i assume you would just pay 24% on whatever part of the gift was over the limit
    Originally posted by Brighty
    Thanks. I got two totally different answers from supposedly authoritative sources. So assuming the estate is £325,000 plus gift of £100,000 then if the donor dies after 4 years what IHT is payable? TIA
    Last edited by Yorkshireman99; 06-07-2017 at 11:26 PM.
    • Brighty
    • By Brighty 6th Jul 17, 9:52 PM
    • 650 Posts
    • 325 Thanks
    Brighty
    Thanks. I got to totally different answers from supposedly authoritative sources. So assuming the estate is £325,000 plus gift of £100,000 then if the donor dies after 4 years what IHT is payable? TIA
    Originally posted by Yorkshireman99
    £24k I assume. I'm no expert, just going by what it says in that link, it's pretty clear. What were you told different and justification or reasoning did they give?
    • Keep pedalling
    • By Keep pedalling 6th Jul 17, 10:10 PM
    • 3,259 Posts
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    Keep pedalling
    Taper relief only applys if the deceased has gifted over his/her £320k nil rate band in the previous 7 years and it only applies to the portion of the over the limit. So for instance if you gave £400k away4 to 5 years before death IHT would apply fully to £320k and tax on the remaining £80k is reduced by 24%
    Last edited by Keep pedalling; 06-07-2017 at 10:16 PM.
    • Keep pedalling
    • By Keep pedalling 6th Jul 17, 10:12 PM
    • 3,259 Posts
    • 3,467 Thanks
    Keep pedalling
    If your parents were married and mum left everything to dad, then you can use her allowance, giving you a IHT limit of £650k on dads estate, if he died after April this year, there is also the new additional nil rate band on property of £100k each, which takes it up to £850k, assuming the property is being left to the children.

    There is taper relief on the 7yr rule regarding gifts
    https://www.gov.uk/inheritance-tax/gifts

    Years between gift and death Tax paid
    less than 3 40%
    3 to 4 32%
    4 to 5 24%
    5 to 6 16%
    6 to 7 8%
    7 or more 0%

    If the house was owned by your parents originally as joint tenants, then probate for mum shouldn't be required, land registry will just need probate for dad and a copy of mums death cert to transfer it into your names. Probate for mum will be required if they owned the house as tenants in common and it wasn't sorted out at the time.
    Originally posted by Brighty
    Thanks. I got to totally different answers from supposedly authoritative sources. So assuming the estate is £325,000 plus gift of £100,000 then if the donor dies after 4 years what IHT is payable? TIA
    Originally posted by Yorkshireman99
    As the gift is under the nil rate band, the full 40% woould be due, so £40k
    • Yorkshireman99
    • By Yorkshireman99 6th Jul 17, 11:32 PM
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    Yorkshireman99
    As the gift is under the nil rate band, the full 40% woould be due, so £40k
    Originally posted by Keep pedalling
    Thanks. So if you gift less than the nil rate band the whole gift is subject to IHT at 40% until 7 years have elapsed. In other words there is no taper relief in these circumstances. Or have I still misunderstood it! My brain is hurting at this late in a long day.
    • Keep pedalling
    • By Keep pedalling 7th Jul 17, 12:03 AM
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    Keep pedalling
    Thanks. So if you gift less than the nil rate band the whole gift is subject to IHT at 40% until 7 years have elapsed. In other words there is no taper relief in these circumstances. Or have I still misunderstood it! My brain is hurting at this late in a long day.
    Originally posted by Yorkshireman99
    That is correct, although that vital piece of info is not pointed out on the government's own website which helps create this confusion.

    https://www.gov.uk/inheritance-tax/gifts

    This site explains it better.

    http://penguintaxplanning.co.uk/misconception-around-gifts-taper-relief/
    • Yorkshireman99
    • By Yorkshireman99 7th Jul 17, 12:23 AM
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    Yorkshireman99
    That is correct, although that vital piece of info is not pointed out on the government's own website which helps create this confusion.

    https://www.gov.uk/inheritance-tax/gifts

    This site explains it better.

    http://penguintaxplanning.co.uk/misconception-around-gifts-taper-relief/
    Originally posted by Keep pedalling
    Thank you.This explains my confusion as the HMR&C site was one that I compared with another. I am reminded of someone I once knew who sometimes said "I see it all, not quite" when he did not get the point! I shall reflect on the points after some sleep!
    • getmore4less
    • By getmore4less 7th Jul 17, 6:54 AM
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    getmore4less
    Back to basics. picking up a few points along the way

    When mother died everything went to dad and we did not have to do anything with probate. She died almost two years ago.
    when mum died was there a will.
    if not what was the value of her estate.
    how did they own the house what was its value

    how close to the 2 years are you?
    (there may still be a window for a DOV if it would help(unlikely).

    Probate for mum will be required if they owned the house as tenants in common and it wasn't sorted out at the time
    Not true even TIC can be done without a grant from the first death.

    So am I right in thinking there will be some taper relief for a gift? Are we able to use mum's portion of IH tax allowance?
    Difficult to tell as important information is missing.
    Start with gifts with reservation, if that applied then there are no failed PETS anyway.

    So did any parent stay in the house after gift and did any of the kids live there.

    The gifts use up the nil rate band first so if below £325k no taper relief, if gifted by dad and mums estate transferred to dad then that's £650k and possibly upto £850k before any taper relief on the gifts.
    Thanks. I got two totally different answers from supposedly authoritative sources. So assuming the estate is £325,000 plus gift of £100,000 then if the donor dies after 4 years what IHT is payable? TIA
    In that example the gift uses up £100k of the nil rate band so NO IHT on the gift just less (£225k) nil rate band for the rest of the estate, that now has £100k liable to IHT.

    ................................................
    Need a proper time line and some real numbers to have any chance of giving any guidance on what to look out for.
    • Yorkshireman99
    • By Yorkshireman99 7th Jul 17, 8:28 AM
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    Yorkshireman99
    Thank you.This explains my confusion as the HMR&C site was one that I compared with another. I am reminded of someone I once knew who sometimes said "I see it all, not quite" when he did not get the point! I shall reflect on the points after some sleep!
    Originally posted by Yorkshireman99
    The other confusion the concept that the gift gets some relief but this is then deducted from the nil rate band. What matters is the total IHT take on the whole estate. Apportioning it between parts of the estate is irrelevant. Only HMR&C's lawyers and the Chaacller could have dreamed up such a scheme!
    • getmore4less
    • By getmore4less 7th Jul 17, 9:43 AM
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    getmore4less
    The other confusion the concept that the gift gets some relief but this is then deducted from the nil rate band.

    that's is not how it works, the gifts get the nil rate band first, then if over that then there is potentially some taper relief on the tax due on the bit over taper relief does not reduce the gift just the tax

    What matters is the total IHT take on the whole estate. Apportioning it between parts of the estate is irrelevant. Only HMR&C's lawyers and the Chaacller could have dreamed up such a scheme!
    Originally posted by Yorkshireman99
    If the gifts are over the nil rate band then the gifts get taxed and the liability for that tax fall on recipient the gifts.

    The estate then gets taxed and the estate pays.


    there are additional complications for chargeable lifetime transfers as they pay IHT up front and that get included in the calculations.
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