probate, two parents

srcandas

Well I guess most of us have/had two parents

Sadly in Feb my mother passed away. An estate of about £500,000. There is a will and my brother and I to share 50/50. Straightforward.

But when my father died in 2006, before the transfer of inheritance tax existed, a solicitor adjusted my fathers will leaving £200,000 to my brother and I. It was arranged that we could not grab it while my mother lived. By this means it was hoped to avoid the ITL that was £300.000 I think then.

However of course you can now transfer easily enough giving a limit in excess of £600,000.

My question: Presumably I will have to enact my father's side of the will, transfer the left over allowance to my mother, enact my mother's part of the will.

Does that seem right and does anyone have any experience of this?
Could it go horrible wrong and I as executor end up with a tax demand in August?
Despite the costs would I be best to go the sols route or might that not even help?

Should say despite the inheritance there is not a lot of money about due to costs todate so we would like to limit costs if at all possible.

I'd be very grateful for any comments no matter how undetailed. Tx in advance

Annisele

Sorry for your loss.

I'm not sure what you mean by "a solicitor adjusted my father's will". Do you mean that some sort of trust was set up, maybe with you, your mother and your brother as beneficiaries? If that's the case, you won't need to "enact my father's side of the will"; that would already have been done.

I think you first need to understand exactly what your mother's estate consists of (because from the sounds of it the money left by your father might not form part of her estate at all).

Savvy_Sue

Did the solicitor do a Deed of Variation?

TBH, with things like this it's probably worth a) getting a recent book from the library and b) making an appointment with a local solicitor for advice.

Or if you're in a trade union, or have legal cover on your house insurance, see if you can get some telephone advice. I would check it out, but I had some very helpful advice from the union in a similar situation, although it was a very specific question about transferring Dad's half of the house to his beneficiaries.

srcandas

Many tx Annisele and Savvy_sue for replying.

Unfortunately I do not have access to the paper work yet but indeed I remember my mother saying that it was a 'Deed of Variation' now you mention it.

I must admit I find a variation of a will after death most weird but my brother at the time went with my mother to a solicitor and he performed the task which seemed logical to my brother at the time. Sadly my brother is not a lot of help at the moment but soon I hope to have all the necessary paper work.

I'm just a little concerned that this will get bogged down (already 3 months since my mother's passing) and in August, despite the estate being below the double threshhold, that I will get some estimated demand for tax that I cannot pay

I'll certainly start reading up but of course any further thoughts very welcome.

Cheers :beer:

Susan_Frost

Sorry to hear you have lost your mum.

Someone will correct me if I am wrong but:

You will not be expected to pay any tax until things have cleared and you have received your share of any money. Tax is paid on what you receive / earn in the last tax year.

So - What you get between 5th April 2011 and 5th April 2012 will go on the tax form you receive in April 2012 and you complete it for what money you have received in the past 12 months.

Dont panic over it - if unsure, give the tax office a ring, I have always found them to be very helpful.

srcandas

Susan_Frost wrote: »

Sorry to hear you have lost your mum.

Someone will correct me if I am wrong but:

You will not be expected to pay any tax until things have cleared and you have received your share of any money. Tax is paid on what you receive / earn in the last tax year.

So - What you get between 5th April 2011 and 5th April 2012 will go on the tax form you receive in April 2012 and you complete it for what money you have received in the past 12 months.

Dont panic over it - if unsure, give the tax office a ring, I have always found them to be very helpful.

Tx Susan

I think you are talking about income tax. The date for payment of Inheritance Tax is stated as 31st August 2011 for someone dying in February 2011.

"The money generally comes from the deceased person’s estate. However, because the tax must be paid within six months of the death and before the grant of probate can be issued (or grant of confirmation in Scotland), sometimes the executor has to borrow the money or pay it from their own funds. This can happen if it hasn't been possible to get the money from the estate in time because it's tied up in assets that have to be sold." says HMRC.

I have no problem paying taxes that are legitimately owed by myself but in this case it looks like there is a possibility the process for whatever reason goes beyond 31/8/2011 and HMRC make an assessment. Even though this money may be reclaimed in the future what are the consequences if I cannot raise the dosh?

I can well see why people refuse to be executors and it certainly makes me very grateful to those members of my family, no longer with us, who have done the necessary in the past

getmore4less

You need to establish what if any nil rate band is left from your fathers estate.

If £200k was distributed/put in trust and the rest when to mum then there will be some left.

There is currently upto £650 total joint nill rate band available across both estates.

If the total mum/dad of £500k still includes that £200k then this should be OK. if not then the total is around 700k so there my be a bill on around £50k, unless you can squeeze the valuse of some asets down(like a house).

I am no expert but check the status of the trust(who are the trustees) for that £200k if mum had access to the capital it may stil form part of her estste.


If most is in a house then the IHT Tax liability can be in installments most after probate.

There are a few OK books that you can have a read off.

Look like you need to do a IHT400(and suplimentory), start on that, and it may help clear up some of the things you need to do and highlight where you need to read up. it has the nill rate band transfer caculation.

DEFINATLY get the das probate and IHT return the numbers need to match across the estates, HMRC do cross check.

srcandas

getmore4less wrote: »

You need to establish what if any nil rate band is left from your fathers estate.

If £200k was distributed/put in trust and the rest when to mum then there will be some left.

There is currently upto £650 total joint nill rate band available across both estates.

If the total mum/dad of £500k still includes that £200k then this should be OK. if not then the total is around 700k so there my be a bill on around £50k, unless you can squeeze the valuse of some asets down(like a house).

I am no expert but check the status of the trust(who are the trustees) for that £200k if mum had access to the capital it may stil form part of her estste.


If most is in a house then the IHT Tax liability can be in installments most after probate.

There are a few OK books that you can have a read off.

Look like you need to do a IHT400(and suplimentory), start on that, and it may help clear up some of the things you need to do and highlight where you need to read up. it has the nill rate band transfer caculation.

DEFINATLY get the das probate and IHT return the numbers need to match across the estates, HMRC do cross check.

Many thanks getmore4less that is very very helpful.

Certainly the 200K is part of the 500K. It largely consists of a house. I have an evaluation from an agent putting it at 400k for probate purposes. Its a little tricky because you wouldn't want to sell it in its current state. The agent reckons a £25k spend and it might make as much as £480k. Can you make an allowance for cost of sale and stamp duty?

Then there is about 110k in cash, savings, etc. and then the personal assets and house content.

My father died in 2006 so the limit then was £285k. I assume they base it on that? So if the variation was for 200k we have 85k to try and get transferred.

So if HMRC were funny about the valuation we might be getting close to 325k + 285k = 610k.

I'll make sure I raise the point about the numbers matching. Many tx and enjoy your day :beer:

srcandas

Some progress and a question. If anyone could confirm my logic and/or answer the question I would be very very ........ :j

After a lot of reading and calculations I have come up with a Baldrick type cunning plan!!!

The estate is valued at less than £550,000 (gives a bit of room on house valuation)

My father left £200,000 in 2006.
His nil rated allowance then was £285,000
This means he didn't use 29.8% of his allowance (according to HMRC notes it is the percentage you transfer which gives a little more than I thought )
So 29.8% of last year's allowance (when my mother died) £325.000 is £96,850
So £550,000 less the £200,000 left by my father = £350,000
My mother's allowance (£325,000) plus the transferred pa's allowance (£96,850) = £421,850

So I can say there is nothing owed. I can apply for probate (Form PA1)
Claim transfer of allowance (Form IHT217)
Declare excepted estate - below threshold (Form IHT205)

So far so good. Now I have read that the timing of the claim for my Pa's unused allowance can be critical. Can I safely apply for probate with the PA1 and return the IHT205 and IHT217 when I get probate and thus the figures?

My brain hurts now

getmore4less

[*]when the spouse or civil partner died their estate did not use up any of the nil rate band available to it (see note page 4)
I don't think you can use a IH205 since you don't have the full amount of unused nill rate.

Looks like a IHT400 will be needed with 402 suppliment

Just takes a bit longer because it has to go tothe tax office first.

2 year for claiming the unused nill rate band on a 402(1 year on a 217)

BTW the house valuation for IHT purposes is at DOD

Check the impact of doing it up on IHT and future CGT on the estate ot yourselves.

WHat is in the trust? must be part of the house check the tax situation with the trust if the asset is sold.

srcandas

getmore4less muchas gracias again

"I don't think you can use a IH205 since you don't have the full amount of unused nil rate."

I looked at that. It does however say "if you have completed IHT 205 and the estate now is less than double the allowance and the estate otherwise qualifies as an excepted estate".

I couldn't see any limitation based on the fact I am transferring only part of the nil rate allowance. But equally IHT402 (now you mention it :beer:) looks the bees knees for this. I assume if you go the IHT400 route you can't miss out - just a little more admin and time while it goes to the tax office.

One possibility would be to ignore or void the Deed of variation. That would simplify matters. The only issue would be if HMRC claimed that as it had existed it had already reduced my father's limit. Certainly it did not stop the whole house being transferred to my mother.

Luckily the house prices are not moving much at the moment but I had the evaluation done based on the DOD. I only have one evaluation but I assuming that is enough? Interestingly the house valuation is very little different from when my father died so that simplifies things.

Again many thanks and any further info much appreciated