Inheritance tax nil rate question,Would love to know the answer

belcon

My Mother's late Father's house is being sold this year, then will be divided between herself and her 4 siblings. The father died in 1998, but my Mother's youngest brother was still living there so the house wasn't put up for sale. But now that brother passed away 2 years ago, so it is now on the market, and when sold will be divided up between the remaining siblings. The question We would like to know is, is the Inheritance tax nil band rate counted this year or does it go back to 1998 when her Father died.We live in Australia. When my Mother emails her Brother in England who is in charge of probate he doesn't answer the question.
So thats' why I'm here. Any help on this matter would be most appreciated.
Thankyou

Richard_Webster

It will be the nil rate band that applied in 1998.

If any tax was payable it should have been paid by now.

neverdespairgirl

But there could be capital gains tax payable in the difference in value between 1998 and now, I think?

belcon

We were afraid that it might go back to 1998. The nil rate was 223,000 pounds back then. Where it is 320,000 pounds now.
Because the youngest brother continued living in the house for another 8 years, nothing was ever settled. The family were content to let him keep living there. The house is in Richmond and is only now on the market to be sold. No taxes have been paid yet, and the brother who is in charge of probate said that it will be deducted after the house is sold, but never said what that percentage was going to be.
The only info I can gather from Australia is what I find on the internet. We don't have Inheritance tax over here. People here paid more than enough tax while they were alive.

moanymoany

I think your mother should have her own legal adviser. If the brother isn't bothering to answer her questions he may be making decisions she would not agree with.

Very difficult to do things long distance!

silvercar

On the face of it there could well be a CGT liability. Your mother could be taxed on the difference between her share of the property in 1988 with a sitting tenant paying no rent and her share of the sale price.

Normally there is a probate value, and I find it strange that the inheritance wasn't settled soon after 1988, the probate value would then be reduced by the fact that the property was occupied. The reduction could be anything from 10-50% depending on the age of the brother and the rights he had to remain in the property.

It may be that some clever tax planning was done before your grandfather's death, to keep the estate under the limit eg passing the brother living at home a share of the property long before your grandfather's demise.

CLAPTON

If probate was never obtained then presumably the house is still in the grandad's name?

sdooley

Inheritance tax will be based on the 1998 nil rate band but will also be based on the 1998 value of the house, which will presumably be a lot lower. As some of the other posters have said, there is a risk of post-1998 capital gains tax on the value of the house.

Your grandfather's estate could quite possibly have permitted his son to continue staying in the property but unless it was provided for in a will I would expect this to have been at a rent (which if not received in your uncle's lifetime should be payable from his estate, if any). If no proper arrangements were put in place (and this does assume your uncle had assets - and that the beneficiaries are different) it would not be unreasonable to ask your uncle's estate to meet any CGT arising in your grandfather's estate.

And in Australia you may not have inheritance tax but you do have capital gains tax. By paying inheritance tax here you wipe out any capital gains tax in the estate (to the date of death - not post-death gains) so actually heirs can be better off with inheritance tax than if it were abolished.

CLAPTON

rereading the post ....

in 1998 the house was left to the five off spring
was probate obtained at that time and what was probate value for the house (bearing in mind the above comments of silvercar)


one of the offspring continued to live in the house until he died in 2006.
was probate obtained.... he owed 1/5 of the house
who inherited his share... the 4 surviving sibling?

then each of the 4 sibling will have

1/5 of the house obtained in 1998 and will be liable for CGT based on the gain
...plus 1/4 of 1/5 obtained in 2006 ... possibly no gain here given the state of the housing market


how much is the house worth now?

belcon

The house is still in our Grandfather's name. The house was originally a council house. When our Grandmother died several years earlier, one of the Uncle's convinced our Grandfather to buy the house with the money he got from our Grandmother's insurance so the youngest Uncle wouldn't be out in the street if something happened to him. Our Grandfather never wrote a will before he died.
My mother and Aunt who both live in Australia never questioned the right of the younger brother to continue living there. But after the Younger brother died the Uncle who convinced our Grandfather to purchase the house and helped with all the purchasing documents thought he could keep the house for himself, because he believed he was morally intitled to it for the the things he had done for his Father and younger brother. As it is he managed to have all the money the younger brother had in his account after he died because he convinced him to get a joint account because the younger brother got a phobia about leaving the house so the older brother could pay the bills etc for him.
Finally another Uncle got probate of the house when the first one was just planning to keep the house for his himself. The house is now on the market for
360k. Also the Uncle who has probate has agreed to give the Uncle who wanted to keep the house 40%. He's doing this he said to keep the peace and stop the Arguments. My mother and Aunt don't think it's fair but are here on the other side of the World.
I didn't actually plan to say so much, but it sort of flowed out as I was trying to explain the situation a bit better.

CLAPTON

if it matters to you or your mother then see a soliticor and consider putting a charge on the house to prevent its sale without your mother's consent.