Inheritance tax questions

headintheclouds

I am getting more and more confused about Inheritance Tax so I wondered if any of you clever people might be able to answer a couple of questions to help me. I asked a couple of things a few weeks ago and got some great help, but these are additional questions. Our family solicitor is away on holiday and, as I'm losing sleep over these things, I'd rather have some help before he gets back.

My father died 6 weeks ago, 18 months after my mother. We know that we are in line for Inheritance Tax. The house has a probate value of £350 000. There is very little property of value in addition to the house, but there are investments of about £30000, bank accounts totalling about £10000, a car, and a couple of small life insurance policies totalling about £2000. There is an insurance policy that will provide about £20000 towards the IHT - taken out specifically for that purpose, but it certainly won't cover the whole amount.There are no outstanding debts and my sister and I are joint beneficiaries. We are also executors, along with the solicitor.

1. We intend to sell the house after probate is granted. Is inheritance tax paid on probate value or the actual amount realised from the sale? Property prices are going up in that area and it's likely that a sale in few months' time will realise more than the probate value.

2. Some postings I have read on this site imply that IHT has to be paid before probate is granted. Is this the case? Would I have to pay it before the house was sold? I don't have much in the way of financial assets - particularly at the moment, after funeral costs, ongoing bills for the house, which we're using a couple of nights a week, etc. etc., so how do people usually deal with this?

3. Probate might take a few months as there are a couple of clauses in the Will that require some sorting out. Is there any way we might be able to give Dad's car to my Aunt before probate is granted? At the moment it's a depreciating asset and we'd rather it was used. It's worth about £3500.

4. In valuing the contents of the house, how do I calculate the values? We want to distribute the bulk of the furniture and other goods amongst family and friends, and there's very little of signifcant value - no antique furniture or anything. Would it be a good idea to get an overall quote of value from a house clearance company, even though we won't be using them to clear the house? I haven't got hours and hours to try and work out what individual things might be worth and I don't know where to start.

I really would appreciate your help. I know my questions might sound stupid - this really is not my area of expertise. I'm not trying to bypass the solicitor or gain access to free legal help - I wouldn't want to exploit anyone like that, but I would really value any quick answers you might be able to give so that I am in a better position to ask our solicitor the detailed questions, and get some sleep at night.

Thanks in anticipation.

p.s. sorry for such a long posting!

LOST

I am doing a certificate in financial planning and these what the technicalities are:

1. Probate value (at the tim eof death) not the proceeds of the sale i believe as then the sale would be way after the death.

2. IHT must be paid BEFORE any probate is granted and thus before the house is received by the beneficiaries.

3. Any official handing over of assets cannot be done until you become the legal owners of the assets - so you have to wait for the probate. But unofficially you can do what you like I suppose as long as nothing is signed over..?

Hope that helps - but remember your solicitor will have a better understanding of the issues as they are the experts in that field - all I have is the knoweledge appropriate in estate planning and protecting the interests of clients who wish to plan against IHT.

bristol_pilot

In my opinion, you should consult a specialist solicitor immediately, it may be possible to avoid inheritance tax completely by using both your father's and mother's IHT allowances. This can be done in certain circumstances by re-writing your mother's will retrospectively and doing some jiggery-pokery with trusts. This has to be done within 2 years of your mother's death, hence the need to hurry. Your solicitor should be a specialist who knows what he is doing with trusts, not someone who normally does conveyancing. The Law Society can recommend someone.

I am not a lawyer, just going on what happened when my father died.

It is correct that IHT must be paid up front before getting your hands on the assets. If necessary, a loan has to be taken out to pay this if sufficient resources are not available. However, certain investments like National Savings and Premium Bonds can be used to pay IHT without first obtaining probate. Your solicitor will advise.

Finally, in my experience you should use a good solicitor to provide legal advice and to do agreed legal work however DO NOT allow them to do routine admin or stuff you could have done yourself. They will take forever and charge you loads. YOU should be in the driving seat.

Sorry to hear about your bereavement and good luck.

dunstonh

bristol_pilot is correct. There is scope for the wills to be redone to suit requirements.

Also, you need to be discussing these issues with the executor of the estate. Many of these things are their responsibility and not yours. Some of things you want to do may not be possible or require the wills to be altered.

The funeral expenses can be paid out of the estate and do not need to be paid by you.

Robert_Sterling

headintheclouds wrote:

4. In valuing the contents of the house, how do I calculate the values? We want to distribute the bulk of the furniture and other goods amongst family and friends, and there's very little of signifcant value - no antique furniture or anything. Would it be a good idea to get an overall quote of value from a house clearance company, even though we won't be using them to clear the house? I haven't got hours and hours to try and work out what individual things might be worth and I don't know where to start.

Get someone from a local Auction house to give you a valuation for PROBATE.
Second hand things in a house have very little value for probate purposes.
In any case "Chattles" are not counted for probate purposes.

Although, as an earlier poster said, you are allowed to vary a will up to 2 years after a death I think you have to make a start on the variation in the first six months after the death.

Robert_Sterling

A will can not be altered after death.
What actually happens is that a beneficiary of a will can redirect their inheritance to someone else.
In the present situation I guess that your father would have inherited and so his inheritance can not now be redirected.




This is not legal or financial advice.

headintheclouds

Thanks to all of you for your help. I think it's helped me to clarify some of the questions I need to ask the solicitor when he is back next week.

Also, you need to be discussing these issues with the executor of the estate. Many of these things are their responsibility and not yours.
My sister and I are named executors, along with the solicitor - hence my feelings of responsibility for all that happens. It's one of those things where my Grandfather knew his father, my dad had been dealing with him for years etc. - "a safe pair of hands"! However, I'm cracking on with the routine stuff and trying just to pass him the info. he needs to do the more technical legal work.

In any case "Chattles" are not counted for probate purposes.
Can someone please explain the difference between the house contents and "chattles"? I thought it was all the same and everything had to be counted.

Thanks again. You are a very helpful bunch of people.

milla

I can only give you the benefit of my experience and please understand that this is not legal advice.

However ,as I see it , if, when your mother died , your parents had equal assets ( about £430.000 shared between the 2 of them = £215.000 each )your mother's assets could be redirected into a discretionary trust (up to £263.000 at that time ) This would need to be done by a solicitor (who would do a Deed of Variation ) and also a Financial advisor who could sort out the trust . We started the Deed of Variation process about 9 months later but the Financial Advisor did speak to IR to let them know .

That would leave your father with assets of £215.000 which would not be liable for IHT(as it is now £285.000).

Regards

milla