Where to find out about inheritance tax?

Lois_and_CK

I was wondering if anyone could help me. I am the youngest of three girls, and our mum recently showed us her and my dad's will, so that when the worse happens, we know where to find their paperwork and what to expect.

My sisters have started bickering about the will already. Mum would be horrified if she knew. I don't want her to find out they're arguing over her will, so I want to try and settle their argument as quickly as possible.

The estate has been split according to age of each child. My oldest sister is inheriting their house and 20% of their cash, my other sister - the middle one - and I are each inheriting 40% of their cash, with my middle sister also getting some other items like furniture and so on. I'm just grateful to get anything - it is, after all, mum and dad's wishes and I believe they should be respected. But my middle sister is annoyed that our older sister is getting more than she is (I don't know how much cash they have, but we do know the house is worth much more than their 'cash-pot').

I had a word with her and told her mum would be upset if she knew my sister was annoyed, and she relented and said she'd accept our parents' wishes. But then our older sister told her that inheritance tax had to be paid on the whole estate's value - including the house - before any of us got given anything. She believes that the inheritance tax will have to come out of the cash-pot, which will significantly reduce the money my middle sister and I receive, while she will still get the house at its full value.

My middle sister refutes this, saying that we each pay inheritance tax on the portion of the estate we inherit; eg, our older sister needs to pay inheritance tax on the house value, and me and my middle sister don't contribute to this, instead just paying our own inheritance tax on our own cash share.

This has flared up into another argument between them, resulting in my older sister saying she is going to speak to mum about it to resolve this inheritance tax issue once and for all. I'm horrified and really want them both to leave mum alone, so now I'm stuck trying to find out what the situation is with inheritance tax (and it's making me feel goulish, greedy and ashamed that I'm trying to find out how much money I'm due to inherit while my parents are still alive).

Does anyone know of any good websites that have this kind of information that would explain our complicated situation?

Thank you for reading.

lesley1960

A bit thoughtless of your parents tbh , where there is money there will normally be arguments . I know inheritance tax is calculated on the whole estate . Who is the excutor of the will because they will be the ones responsible for sorting it out

Lois_and_CK

Thanks for resolving the question on how inheritance tax is calculated. My eldest sister is named as the executor of the will. I'd like to find out how inheritance tax gets paid, ie where that money comes from - the estate's 'cash-pot' for example - so any suggestions would be very welcome.

Thoughtless or not, the issue has raised its ugly head and you're right - the issue of money is causing my sisters to argue. It's not pleasant to witness and I want to put all this to bed as quickly as possible. Obviously things would be much simpler if our parents had split their estate equally, but that's their choice, and I don't want to get into the rights and wrongs of what my parents have done.

Mojisola

Your eldest sister might be in for a shock - if your parents no longer own the house when they die, she may only get the 20% cash!

Is your eldest sister the only executor? If so, from her present attitude, I think she will pay the IHT from the cash available and keep the property. That will comply with the law.

Savvy_Sue

Mojisola wrote: »

Your eldest sister might be in for a shock - if your parents no longer own the house when they die, she may only get the 20% cash!

Very true! :rotfl:

There's a whole heap of information on the HMRC website, of course.

but maybe your big sister WILL go to mum, bend her ear, and mum will change the will as a result! In YOUR favour ...

Although why your sister would bother your mum about this I'm not sure. It's clear to me that whoever has to pay the IHT, it's not going to be your mum and dad.

disgruntledpuppy

The basic position is that the Inheritance Tax on the whole estate is payable out of the residue of the estate if the Will is silent on the matter, which is likely to be the cash pot you refer to - ie all bank accounts, investments etc, everything not otherwise specifically bequeathed in the will. However, the Will can be drafted to allow for all bequests to bear their own share of the Inheritance Tax and so you would need to check the Will.

Lois_and_CK

Oh dear, middle sister is NOT going to be happy if she finds out our eldest sister could take the inheritance out of the cash-pot.

Thank you so much everyone for your advice, especially for the link to HMRC, which is very useful.

I think now might be the time for me to bow out of this argument and leave my sisters to it. It's becoming clear that no matter what, one or other of them isn't going to be happy and nothing I do is going to help the situation. I'm off to find a fence to sit on.

paddy's_mum

While I agree with you that to bow out of the bickering and sit it out is probably a wise course of action in the short term, there are several things you mention about the will that suggest that perhaps your parents have gone into this blindly and made some huge mistakes. It seems to me that many things might have been done poorly and can have no other result but trouble, confusion and hostility once they have passed away and the will (but wouldn't that normally be their wills - plural) comes into force.

If nothing else, I would be asking if the will(s) had been drawn up by a qualified person - a solicitor of professional will writer. If your parents have been foolish enough to write their own will, the potential for years of squabbling (when only the lawyers get rich sorting it all out!) is enormous and I can quite see that an entire family could be fractured because of the perceived unfairness.

If, as I fear, they have taken no notice of the minefield they have entered and through their own ignorance prefer to pass huge chunks of their estate to the Inland Revenue or into the pockets of the lawyers of feuding sisters then so be it - but it may be a symbol of your greater good sense and love to just check that the will(s) have been drawn up appropriately and properly.

I have to say that the fact that they have treated sisters so differently is sounding alarm bells to me but it may be that you know the hows and whys of the matter. Hope that helps and good luck in staying out of the fray as much as you can - I truly don't envy you.

Dave101t

why didnt your parents just split it equally?
and why dont you all just discuss it with the parents direct.
its this sort of pu ssy footing about that causes fractures in the family

margaretclare

Your mum's and dad's wills...is what you are bickering about the residue i.e. what is left after the second of them dies? You talk about 'their' wills as if they would go together - unlikely, unless they both die in a tragic accident.

They each have an IHT threshold and whichever one of them goes first passes on his/her IHT threshold to the survivor. So when the second of them dies, IHT only kicks in if the estate is £650K (IIRC).

Lois_and_CK

Thank you for the advice, I will check about how they got the will drawn up.

I understand what you mean about splitting the estate equally. Of course this would make things a whole lot simpler, and I can only guess at their reasons. I'm "pu ssy footing" as there is a complicated, hurtful and fractured family history; relationships that are tenuous at best. We don't have the closest or easiest of relationships.

Putting the rights and wrongs of treating their children differently in their will aside, I can at least ask if the will has been drawn up by a qualified person; I'd hate to see their money wasted on years of my sisters' bickering.