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  • FIRST POST
    • greatnewseverybody
    • By greatnewseverybody 11th Jan 18, 3:28 PM
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    greatnewseverybody
    Property Inheritance Question
    • #1
    • 11th Jan 18, 3:28 PM
    Property Inheritance Question 11th Jan 18 at 3:28 PM
    Apologies, very new to trying to understand this complicated matter!
    My question is that if you have been named specifically to inherit something from a will, for example a house, but there are other people who will be receiving other smaller elements (mainly cash gifts) as well, what happens if the estate needs to sell the house (the estate would be well over £325,000) to be able to afford to pay the inheritance tax? Does the property get sold, all the bills, debts etc get paid, then the cash inheritance stated in the Will get paid out, then whatever is left go to the person who was originally stated to inherit the property? Really not sure how this works.
    Thanks,
    Paul
Page 1
    • Yorkshireman99
    • By Yorkshireman99 11th Jan 18, 5:55 PM
    • 3,539 Posts
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    Yorkshireman99
    • #2
    • 11th Jan 18, 5:55 PM
    • #2
    • 11th Jan 18, 5:55 PM
    Apologies, very new to trying to understand this complicated matter!
    My question is that if you have been named specifically to inherit something from a will, for example a house, but there are other people who will be receiving other smaller elements (mainly cash gifts) as well, what happens if the estate needs to sell the house (the estate would be well over £325,000) to be able to afford to pay the inheritance tax? Does the property get sold, all the bills, debts etc get paid, then the cash inheritance stated in the Will get paid out, then whatever is left go to the person who was originally stated to inherit the property? Really not sure how this works.
    Thanks,
    Paul
    Originally posted by greatnewseverybody
    It does depend on the exact wording of the will. However, if you are left the house but after that there is a shortfall then the other beneficaries get a percentage but the house would still be yours.
    • Keep pedalling
    • By Keep pedalling 11th Jan 18, 6:17 PM
    • 4,338 Posts
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    Keep pedalling
    • #3
    • 11th Jan 18, 6:17 PM
    • #3
    • 11th Jan 18, 6:17 PM
    More info required. Is the person receiving the house a direct descendant of the testator? What is the marital status of the testator? Have others been named as residual beneficiaries?
    • Tom99
    • By Tom99 12th Jan 18, 1:54 AM
    • 1,026 Posts
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    Tom99
    • #4
    • 12th Jan 18, 1:54 AM
    • #4
    • 12th Jan 18, 1:54 AM
    It does depend on the exact wording of the will. However, if you are left the house but after that there is a shortfall then the other beneficaries get a percentage but the house would still be yours.
    Originally posted by Yorkshireman99
    That could be pretty harsh on the other beneficiaries, would it still work that way in this example:
    House worth £500k and £50k cash with IHT bill of £50k
    House specifically to child, 10k each to 4 grandchildren and £10k residue to sister.
    Would the child get the £500k house but the other 5 would get nothing?
    • Yorkshireman99
    • By Yorkshireman99 12th Jan 18, 3:48 AM
    • 3,539 Posts
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    Yorkshireman99
    • #5
    • 12th Jan 18, 3:48 AM
    • #5
    • 12th Jan 18, 3:48 AM
    That could be pretty harsh on the other beneficiaries, would it still work that way in this example:
    House worth £500k and £50k cash with IHT bill of £50k
    House specifically to child, 10k each to 4 grandchildren and £10k residue to sister.
    Would the child get the £500k house but the other 5 would get nothing?
    Originally posted by Tom99
    Not harsh simply the law. In the scenario you ask about the grandchildren would get nothing. It is up to the testator, as advised by a solicitor, to have will worded the will to avoid such situations.
    Last edited by Yorkshireman99; 12-01-2018 at 7:04 AM.
    • Tom99
    • By Tom99 12th Jan 18, 4:52 AM
    • 1,026 Posts
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    Tom99
    • #6
    • 12th Jan 18, 4:52 AM
    • #6
    • 12th Jan 18, 4:52 AM
    Not harsh simply the law. In the scenarioo you ask about the grandchildren would get nothing. It is up to the testator, as advised by a solicitor, to have will worded the will to avoid such situations.
    Originally posted by Yorkshireman99
    Which law is it that covers that situation? What if there is only £10k cash but still a £50k IHT bill. Does the cash beneficiary lose all and the house beneficiary have to come up with £40k?
    • Yorkshireman99
    • By Yorkshireman99 12th Jan 18, 6:46 AM
    • 3,539 Posts
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    Yorkshireman99
    • #7
    • 12th Jan 18, 6:46 AM
    • #7
    • 12th Jan 18, 6:46 AM
    Which law is it that covers that situation? What if there is only £10k cash but still a £50k IHT bill. Does the cash beneficiary lose all and the house beneficiary have to come up with £40k?
    Originally posted by Tom99
    It would depend on the exact wording of the will.
    • getmore4less
    • By getmore4less 12th Jan 18, 8:37 AM
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    getmore4less
    • #8
    • 12th Jan 18, 8:37 AM
    • #8
    • 12th Jan 18, 8:37 AM
    There are rules for how all this gets done,

    look up abatement will help understand the order that legacies get reduced when insufficient exist to cover them all.
    • Margot123
    • By Margot123 12th Jan 18, 8:38 AM
    • 531 Posts
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    Margot123
    • #9
    • 12th Jan 18, 8:38 AM
    • #9
    • 12th Jan 18, 8:38 AM
    Does the will state that the property is 'to be held in trust'? A Trust doesn't always mean for the benefit of children, it can be used to safeguard a particular legacy for any beneficiary.
    • Yorkshireman99
    • By Yorkshireman99 12th Jan 18, 8:55 AM
    • 3,539 Posts
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    Yorkshireman99
    Does the will state that the property is 'to be held in trust'? A Trust doesn't always mean for the benefit of children, it can be used to safeguard a particular legacy for any beneficiary.
    Originally posted by Margot123
    Tom is asking theoretical questions. He should instead be doing as per post #8. The main purpose of this forum is to try and help real people solve real problems not as tutorial.
    • Keep pedalling
    • By Keep pedalling 12th Jan 18, 9:11 AM
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    Keep pedalling
    Everything depends on the wording, often smaller gifts will be given free of tax, with any tax burden falling on the residual beneficiaries.

    Leaving specific property to people in a will can be a very bad idea, as there is a good chance that the property may no longer be owned by the testator at the time of their death so the bequest would fail, or as it seems in this case there is insufficient liquid assets in the rest of the estate to meet the testators bequests and tax.
    • Tom99
    • By Tom99 12th Jan 18, 9:30 AM
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    Tom99
    There are rules for how all this gets done,

    look up abatement will help understand the order that legacies get reduced when insufficient exist to cover them all.
    Originally posted by getmore4less
    Thank you, I had not heard of that term before and have now looked it up.
    • Tom99
    • By Tom99 12th Jan 18, 9:31 AM
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    Tom99
    Tom is asking theoretical questions. He should instead be doing as per post #8. The main purpose of this forum is to try and help real people solve real problems not as tutorial.
    Originally posted by Yorkshireman99
    The OP's question was theoretical “for example a house” not a real problem. Even if it was real, me trying to expand the question with an example can only help get a more detailed reply for the OP, me and anyone else who reads the post.
    • Jenniefour
    • By Jenniefour 12th Jan 18, 11:52 AM
    • 1,298 Posts
    • 1,403 Thanks
    Jenniefour
    The OP's question was theoretical “for example a house” not a real problem. Even if it was real, me trying to expand the question with an example can only help get a more detailed reply for the OP, me and anyone else who reads the post.
    Originally posted by Tom99
    I suspect OP's post isn't theoretical at all, there's far too much detail in it.

    However, the difficulty with other readers popping in with more than the very occasional clarification question is that it effectively hijacks OP's thread and may give the impression to the OP that otherwise sound advice is questionable or, worse still, plain wrong - I don't think that's helpful at all and can lead to confusion for the OP. Remember, we know each other on here, so to speak, but those posting problems often have no idea who's who on here unless they themselves are regular readers/responders on this board and most people who post difficulties on here are not. Since the main purpose of this board is to try and help the OP's, let's not confuse OP's by letting our own need/desire to satisfy our curiosity/build on our knowledge get in the way - their need to get some useful guidance is surely much more important. And there are other ways of finding things out without putting questions in which hijack a thread.

    OP, I've also hijacked your thread - sorry!
    • Yorkshireman99
    • By Yorkshireman99 12th Jan 18, 2:30 PM
    • 3,539 Posts
    • 2,886 Thanks
    Yorkshireman99
    I suspect OP's post isn't theoretical at all, there's far too much detail in it.

    However, the difficulty with other readers popping in with more than the very occasional clarification question is that it effectively hijacks OP's thread and may give the impression to the OP that otherwise sound advice is questionable or, worse still, plain wrong - I don't think that's helpful at all and can lead to confusion for the OP. Remember, we know each other on here, so to speak, but those posting problems often have no idea who's who on here unless they themselves are regular readers/responders on this board and most people who post difficulties on here are not. Since the main purpose of this board is to try and help the OP's, let's not confuse OP's by letting our own need/desire to satisfy our curiosity/build on our knowledge get in the way - their need to get some useful guidance is surely much more important. And there are other ways of finding things out without putting questions in which hijack a thread.

    OP, I've also hijacked your thread - sorry!
    Originally posted by Jenniefour
    You have not hijacked the thread! You have made some important points. The difficulty with the this forum is that quite small differences can completely change a situation and the unwary can draw completly wrong conclusions. That is why it is much better to start a new thread rather than hijacking an existing thread. At the very least people should read the stickies" before posting. As far as hypothetical questions are concerned I personally prefer to give piority to real questions. With the powers of Google, and other search engines can provide many answers to basics. Also don't neglect textbooks or specific websites like Which, Citizens Advice or Age Concern.
    • nom de plume
    • By nom de plume 12th Jan 18, 3:03 PM
    • 617 Posts
    • 583 Thanks
    nom de plume
    Apologies, very new to trying to understand this complicated matter!
    My question is that if you have been named specifically to inherit something from a will, for example a house, but there are other people who will be receiving other smaller elements (mainly cash gifts) as well, what happens if the estate needs to sell the house (the estate would be well over £325,000) to be able to afford to pay the inheritance tax? Does the property get sold, all the bills, debts etc get paid, then the cash inheritance stated in the Will get paid out, then whatever is left go to the person who was originally stated to inherit the property? Really not sure how this works.
    Thanks,
    Paul
    Originally posted by greatnewseverybody
    Back to the original question.

    As I understand it, using the rules of abatement, all the legacies other than the house will fail as there is insufficient money in the estate to distribute them. This would leave the house which would have to be sold to fund the IHT shortfall with any surplus after payment of the IHT going to the intended recipient of the house (or the recipient could inject cash to fund the shortfall and keep the house).

    To slightly complicate this, if there are other SPECIFIC legacies (such as My Car, My Wedding Ring) then they would have to have their values added together with the house value and then reduced by a like percentage to reach their distributable worth. This may mean if say the recipient of the house actually wanted the house, they would have to inject some cash into the equation and similarly the recipients of other specific items..

    Cash legacies such as £1,000 to Mrs Jones next door fall lower down the pecking order in these situations and sadly Mrs. Jones gets nothing.

    If there is some cash left over and the house can be given to the intended beneficiary in total, cash beneficiaries get their legacies reduced but the house goes 100% to it's recipient.
    Last edited by nom de plume; 12-01-2018 at 3:06 PM.
    • Tom99
    • By Tom99 13th Jan 18, 5:49 AM
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    Tom99
    After looking up 'Abatement' it seems the order in which debts of an estate are paid is set out in Administration of Estates Act 1925 Schedule 1.

    https://www.legislation.gov.uk/ukpga/Geo5/15-16/23/schedule/FIRST/part/II

    Some of the meaning is unclear to me but I think:

    1 – Residue estate
    2/3/4 – Not sure
    5 – Cash
    6 – Specific legacies e.g. property, ring
    7 – Not sure

    Edit: Link now updated
    Last edited by Tom99; 13-01-2018 at 10:39 AM.
    • getmore4less
    • By getmore4less 13th Jan 18, 10:04 AM
    • 31,168 Posts
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    getmore4less
    That link is not the uptodate version.

    8(b) was repealed.
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