Inheritance Tax question

dollywops

MIL and FIL made mirror wills, with the first £325,000 being left to DH and the balance to the remaining spouse. The property was held in Joint Tenancy. MIL sadly passed away in November. MIL did not have sufficient assets in her own name to comply with the terms of her will. There is a shortfall of, say £75,000.

Now, I believe that means that FIL's allowance will then become £400,000 eventually for inheritance tax purposes. However, what I would like to know is that alternatively, could the shortfall from MIL's will be paid to DH and then FIL's allowance revert to £325,000 or the then prevailing rate.

relaxtwotribes

Sorry for being picky, but the 'shortfall' simply doesn't exist. The will bequeathed the first £325,000, but if the estate only had £250,00 in it, then when that has been passed to DH, the terms of the will have been fully complied with.

Others with better knowledge than I will confirm the situation with regards to your second paragraph, but I suspect the answer is that if the FIL's nil rate IHT band does rise to £400,000 then DH will have to wait until FIL's demise in order to take advantage of that tax break. PETs exempted.

John_Pierpoint

How long ago did the death occur 4 months? - this seems a bit like the wills written before the transfer of the nil rate band was introduced in Autumn 2007. Does it actually state 325K or does it specify the nil rate IHT band in some way.
As you appear to be still within two years of the death, you can change the will by deed of arrangement, provided the beneficiaries who could be better or worse off as a result of the changes can agree.
Depending on FIL's circumstances, a better will could have left him an interest in possession in the extra 50% of the house. Presumably FIL is sufficiently rich to survive on his own income and won't need the 250K. Unfortunately the "joint tenants" rather than "tenants in common" status of the house means it now belongs 100% to FIL.
At the moment MIL has used up 77% of her 325K nil rate IHT band, so FIL should have 123% of nil rate available (currently worth 400K) when he dies.
Not much sign of an increase in the nil rate band in the near future.

https://forums.moneysavingexpert.com/discussion/3129350

So much for the Tory £1,000,000 nil rate band :eek::eek::eek:

relaxtwotribes

The £1m nil rate band will be promised in the run up to the next election, only for it to be dropped again afterwards.

SeniorSam

Although the higher IHT rate allowance was a possibility, it had not been realised that the country's financial position was so bad, as not all figures had been made available to the oposition. This was not made clear until after the present government took over and it is no surprise that more concessions cannot be given at this time. Things can change if information was concealed by the previous government who had managed the countries affairs so poorly. There are many opportunities to plan to reduce IHT if one wishes to take action early enough.

Sam