New will and inheritance tax

KIngMidas

Hi

My grandmother (in her early eighties) and my father (in his late fifties) live together in a large house in Newcastle which she owns outright no mortgage etc. He has lived with her for at least 10 years in the house with her. She is obviously becoming rather elderly and my father is quite sick.

I am sure she has a will and it is probably at least a decade old. She also has one more son who lives in London with his family. I am her grandson and I used to live in the house with my grandmother and father from the age of thirteen until the age of twenty.

My question is that I know that if she were to sadly pass away first then she would want my father to remain living in the house. However my concearn is that half would have to go to her other son and inheritance tax would also have to be paid. So this would mean even if my fathers brother agreed to let my father stay in the house he would still have to sell to pay the government whatever inheritance tax was owed?! He has no liquid assets his only real worth would be the house.

Al though obviously since my grandmother has been like a mother to me I would personally like to receive something this post is not about that. I am trying to get setup for whatever is best for my father.

I am not sure of the properties value but I am sure it is worth enough inheritance tax would have to be paid.

What is the best thing for me to advise them to do?

Linton

KIngMidas wrote: »

Hi

My grandmother (in her early eighties) and my father (in his late fifties) live together in a large house in Newcastle which she owns outright no mortgage etc. He has lived with her for at least 10 years in the house with her. She is obviously becoming rather elderly and my father is quite sick.

I am sure she has a will and it is probably at least a decade old. She also has one more son who lives in London with his family. I am her grandson and I used to live in the house with my grandmother and father from the age of thirteen until the age of twenty.

My question is that I know that if she were to sadly pass away first then she would want my father to remain living in the house. However my concearn is that half would have to go to her other son and inheritance tax would also have to be paid. So this would mean even if my fathers brother agreed to let my father stay in the house he would still have to sell to pay the government whatever inheritance tax was owed?! He has no liquid assets his only real worth would be the house.

Al though obviously since my grandmother has been like a mother to me I would personally like to receive something this post is not about that. I am trying to get setup for whatever is best for my father.

I am not sure of the properties value but I am sure it is worth enough inheritance tax would have to be paid.

What is the best thing for me to advise them to do?

It all depends on what she puts in her will. She has the right to bequeath her house to whoever she wants and she can also set things up so your father has the right to live in the house for the rest of his days. Consult a solicitor.

Inheritance tax would only need to be paid on the part of the total estate over £325K.

getmore4less

What is the best thing for me to advise them to do?

Tell them they need to check if their cuurent succession planning is adiquate

They could
find out the value of the house
Find out the value of rest of the estate including potential gifts that are less than 7 years old.

find out what her nill rate band will be.
to do this they need to know if any of a spouses nillrate band is transferable.

Then they will know if there is likely to be a IHT issue.

Then tell them to plan. if not done allready

There have been significant changes in tax and trusts so if the will is old it may need revisiting anyway.

you may also want to consider the posibility that your father may die first.

KIngMidas

I am sure the value would be over 325k and my father would not have the liquid assets to pay the inheritance tax. SO he would be forced to sell?

Can they not put the house in joint names? My fathers brother is lovely but I can imagine a very stressful situation for my father if not planned correctly where my fathers brother would force the sale.

Obviously (it is so horrible to be thinking and writing about this but I think it is necessary) my father would die first so then if the house was in joint names etc would my grandmother be liable?

She is forgetful at her age now and although over the years I have explained she needs a new will she never remembers to do anything about it.

As I said I am not trying to be some bloodsucking grandson desperate for the inheritance. I just want them to be prudent (they can leave nothing to me if they choose) so that my father gets to stay in the house or grandmother, my fathers brother gets whatever she wants him to get and the government receive as little as possible.

CLAPTON

IHT allowance for a single person is 325,000; however if your grandmothers estate can benefit from her (presumbaly deceased)husbands allowance then the IHT allowance would be 650,000

what happened to your grandfather?

KIngMidas

my grandfather sadly died over I think it was around ten years ago. Certainly a significant amount of time. SO could her relatives benefit from her husbands IHT or would she need to set it in place?

John_Pierpoint

Most likely your grandmother will benefit from the transfer of the nil rate band between spouses.
You have to be able to prove it and then claim the extra up to £325k nil rate band addition. It depends on what percentage of grandfather's state was left to grandmother.
Time to dust off granddad's probate paperwork?
What has become of your mother?

The difficulty with old people and their wills, is that they fail to realise that at the head of the queue could be HMRC - the unnamed beneficiary.

This situation often gives rise to the caring child being given a life interest in the shared home and the rest of the estate having to find the [STRIKE]death duties.[/STRIKE]InHeritance Tax.
How the property value is then shared out amongst the grandchildren is specified in the grandmother/grandfather's will.

CLAPTON

KIngMidas wrote: »

my grandfather sadly died over I think it was around ten years ago. Certainly a significant amount of time. SO could her relatives benefit from her husbands IHT or would she need to set it in place?

basically, if grandfather left everything to grandmother then grandmother's estate will have a IHT allowance of 650,000
otherwise we need to know the details of what happened to his estate.

xylophone

http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm
http://www.hmrc.gov.uk/inheritancetax/pass-money-property/pass-home-to-children.htm
might be of interest.

getmore4less

John_Pierpoint wrote: »

Most likely your grandmother will benefit from the transfer of the nil rate band between spouses.
You have to be able to prove it and then claim the extra up to £325k nil rate band addition. It depends on what percentage of grandfather's state was left to grandmother.
Time to dust off granddad's probate paperwork?
What has become of your mother?

It depend what % of the nillrate band inforce at the time was used up.

BobQ

The immediate question to ask is whether your grandmother has the mental capacity to make another will. If she does not, it really does not matter as her last will (however old it is) or lack of one will apply.

The next question is whether she remembers what her last will states and whether she still understands what its effects will be.

Without knowing your relationship with her or your father's relationship with his mother, I can only observe that there is a danger that by raising the topic you are viewed as pressurising her into changing her will to what you would like it to say. I am not suggesting you are, but say you raised it again and she told your father's brother what might he say?

Being a bit forgetful does not mean that she cannot make another will. My only constructive suggestion is to ask whether she has a friend that you could speak to and explain your concern that she may not realise the implications of not checking the currency of her will? If the suggestion she speak to her solicitor came from someone else it might have more effect?

You talk about your grandmother owning the house but then refer to your father's half. Its wrong to assume that she has even made a will or if she has what it contains. Was your father living in the house at the time your GF died, if so she may have allowed for this.