Inheritance Tax

VicksLester

I am currently dealing with the estate of a relative in the role of executor not beneficiary. It appears that it will be over the IHT threshold. The will was changed a few months ago and a new beneficiary has appeared on it and stands to inherit most of the estate. This has clearly upset the 2 children who were the original beneficiaries. In order to maximise their share is it possible to make the IHT paid proportional to the amount of inheritance if the will does not specify otherwise?
Thank you

Mojisola

VicksLester wrote: »

I am currently dealing with the estate of a relative in the role of executor not beneficiary. It appears that it will be over the IHT threshold. The will was changed a few months ago and a new beneficiary has appeared on it and stands to inherit most of the estate. This has clearly upset the 2 children who were the original beneficiaries. In order to maximise their share is it possible to make the IHT paid proportional to the amount of inheritance if the will does not specify otherwise?
Thank you

Inheritance tax doesn't come out of their shares - it's paid out of the estate and what's left is divided according to the will.

eddtheduck

Mojisola wrote: »

Inheritance tax doesn't come out of their shares - it's paid out of the estate and what's left is divided according to the will.

While it is true that IHT is paid out of the estate, it is paid from the residue of the estate unless there is something in the will to the contrary, so it depends entirely how the will is worded.

getmore4less

It's not for you to decide who gets what.

Just because the children don't like that things have changed you cannot manipulate.

if you don't understand what the will says you either need to get advice or put up more details so people can comment

If you don't like the risk of dispute you could refuse to take up the position if you have not intermeddled allready.

VicksLester

getmoreforless, I think you misunderstood my original post.
I am not trying to change the contents of the will but I am trying to make it fair for all concerned. There is an account with a specific amount of money in it that has been left to a new beneficiary. It has not been left "free of tax, etc". Therefore, my query is purely - can the amount of IHT be apportioned to that account in order that all beneficiaries receive a fairly calculated benefit.

Mojisola

VicksLester wrote: »

There is an account with a specific amount of money in it that has been left to a new beneficiary. It has not been left "free of tax, etc".

Therefore, my query is purely - can the amount of IHT be apportioned to that account in order that all beneficiaries receive a fairly calculated benefit.

eddtheduck wrote: »

While it is true that IHT is paid out of the estate, it is paid from the residue of the estate unless there is something in the will to the contrary, so it depends entirely how the will is worded.

This was the point edd was making. If there is a specific gift - such as a painting or the contents of an account, that gift has to be handed over as it stands.

Any IHT has to paid from the residue of the estate.

NAR

Mojisola wrote: »

This was the point edd was making. If there is a specific gift - such as a painting or the contents of an account, that gift has to be handed over as it stands.
Any IHT has to paid from the residue of the estate.

Just for my clarification on this. If the painting is worth £500k does that mean the residue of the estate gets hit for the IHT on the value of the painting?

cte1111

NAR wrote: »

Just for my clarification on this. If the painting is worth £500k does that mean the residue of the estate gets hit for the IHT on the value of the painting?

Yes that's correct, the IHT will come out of the residue, unless stated otherwise in the will.

Mojisola

NAR wrote: »

Just for my clarification on this. If the painting is worth £500k does that mean the residue of the estate gets hit for the IHT on the value of the painting?

IHT tax isn't paid on individual items - it's the overall value of the estate that matters.

If individual items are left to people and there is enough left in the rest of the estate to pay the IHT, then the tax would be paid from that residue.

I think it was on MSE recently that someone raised the issue of a house being left to one sibling and the cash assets to the other. The IHT had to be paid out of the cash assets.

getmore4less

Have a search on HMRC for who pays IHT loads of info on how it works.

http://www.hmrc.gov.uk/inheritancetax/paying-iht/who-pays.htm

http://www.hmrc.gov.uk/inheritancetax/paying-iht/who-pays.htm#3

Example two is a close example.

http://www.hmrc.gov.uk/inheritancetax/tax-when-you-inherit.htm

cte1111

Inheritance Tax

You usually won't have to pay Inheritance Tax on money, assets or property you inherit. Inheritance Tax generally comes out of the deceased's estate before the inheritance is passed on. You will usually only owe Inheritance Tax on a legacy if either of the following applies:

it says in the will that you should pay Inheritance Tax

the deceased's estate can't pay it