Inheritance Tax

pollypenny

How can IHT came out of the residue of an estate?

Okay, I will leave my estate divided equally between the two kids. Nothing left, no residue to pay IHT?

Surely any tax is paid first then the legacies ate paid .

getmore4less

pollypenny wrote: »

How can IHT came out of the residue of an estate?

Okay, I will leave my estate divided equally between the two kids. Nothing left, no residue to pay IHT?

Surely any tax is paid first then the legacies ate paid .

i think you are describing the distributing the residue, not specific or pecuniary legacies.

Mojisola

pollypenny wrote: »

How can IHT came out of the residue of an estate?

Okay, I will leave my estate divided equally between the two kids. Nothing left, no residue to pay IHT?

Surely any tax is paid first then the legacies ate paid .

That is the residue.

If you leave your gold jewelry to Lizzie, your car to Harry, your boat to Phil and then the rest of your estate to be sold and divided between Charles and Camilla, the IHT would be paid out of the money made from the "rest of the estate". The specific bequests would be handed over intact and the beneficiaries would not be expected to contribute to the IHT.

Tuesday_Tenor

VicksLester wrote: »

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.

1) But what you deem as 'fair' is both subjective and irrelevant.
A testator can make a will that 95% of his/her relatives and friends think is blatently 'unfair' in some way. But no one has a 'right' to inherit anything from anybody else. A testator can leave their assets to whomever they choose, be it family, friends, or the local dog's home.

2) Your job as Executor is to carry out the wishes of the testator, whatever your views of their 'fairness'.

3) The bigger issue here is whether the testator was of sound mind when they changed the will. If anyone wants to challenge the will on these grounds then they will need specific evidence and it will be a costly process.

4) If you yourself think there is anything invalid or seriously contentious about the will, then you need to think carefully before agreeing to be executor.

And separately, for other readers here:
5) The bequest of a specific account to a named beneficiary is not something I personally have had to deal with. Other posts imply that such an account is treated as a specific material item (such as a house, car, boat, ring) and handed over entire. Can someone confirm categorically that this is the case?

troubleinparadise

I have dealt with a will that had bequests for specific accounts - the contents of savings accounts which were to be given free of tax to the legatee, as worded in the will.

The estate was subject to IHT, so the tax element of those accounts was met from the residue of the estate, which obviously benefitted the legatee at a "cost" to the receivers of the residue, in a roundabout way.

Very straightforward to do, but an interesting way of doing things vis a vis the will. And yes, it could cause an element of resentment to those whose share was reduced as a result if they were so minded.

getmore4less

It is times like this(potential dispute or don't know what you are doing) when lay executors should take legal advice.

It passes the liability of getting it wrong to someone with indemnity insurance.

nom_de_plume

Bumping this thread as it touches on issues I'm likely to have to deal with.

I am executing a will that will without any doubt be hit for IHT. The bequests include a specific property to a named beneficiary. It also includes sums of money described as pecuniary legacies to named individuals.

The sum total of the value of the legacies add up to more than the estimated sum total of the estate after deducting IHT.

Am I right in thinking the cash legacies would bear the IHT and the property, being a specific bequest, would not be touched? The estate after IHT would have some cash left plus the property.

For the record I WILL be seeking independent advice before distribution.

John_Pierpoint

nom_de_plume wrote: »

Bumping this thread as it touches on issues I'm likely to have to deal with.

I am executing a will that will without any doubt be hit for IHT. The bequests include a specific property to a named beneficiary. It also includes sums of money described as pecuniary legacies to named individuals.

The sum total of the value of the legacies add up to more than the estimated sum total of the estate after deducting IHT.

Am I right in thinking the cash legacies would bear the IHT and the property, being a specific bequest, would not be touched? The estate after IHT would have some cash left plus the property.

For the record I WILL be seeking independent advice before distribution.

So how is it going?

Do you have a will that specifically says the individual bequests, be they "the Rembrandt" or "monies on deposit with the Post Office Savings Bank", are left "free of tax" ? or does it just rely on the default that is normally "free of tax" anyway.

What if one of the specific bequests is "my luxury motor car" bought at the time the will was written for £25,000, but at the time of death a £1,000 banger ?
Then the beneficiary says, "I really don't want to come all the way from Scotland to the South coast, to collect it. Just sell it and send me the money".
Does the executor reply "OK but do you realise, that by the time I have "iterated" the calculation, it is probable that I will have to knock off 10% to pay your share of the IHT ?"

That also leads to the somewhat bizarre scenario:
"Well gang, as you know we are all getting a percentage of this estate, I have had the local auctioneer round to value the contents, I am afraid it is not good news and most of it will have to go into the general house sale, with a commission of 30% plus VAT if they sell, otherwise we are facing land fill charges for the disposal. Do any of you want to take away any of these heirlooms?" murmur murmur "Oh by the way, in the accounts I am meant to gross you up and so charge you a premium to cover the IHT, which I calculate will be about 10%"
"Any takers?"

What if the deceased (and idiot will writer) has bundled off all her assets to specific beneficiaries/trusts but has forgotten a major priority beneficiary - the tax man ?

My favourite went something like this:

Niece, executor and sole beneficiary: "You need to make a date with me for my son to come round with a van and clear auntie's personal possessions from the house. That is it buttoned up, as the only other asset is a building society account with £50k in it."

Me: Hang on a minute - don't forget that auntie has been living rent free in that house for 30 years under the terms of grandmother's will.
The house is worth something over £325k, we won't know exactly, until I sell it.
You are going to need to find a chunk of the IHT out of that £50k.

Niece, executor and sole beneficiary: ?!@:%??!!!!

nom_de_plume

John_Pierpoint wrote: »

So how is it going?

Do you have a will that specifically says the individual bequests, be they "the Rembrandt" or "monies on deposit with the Post Office Savings Bank", are left "free of tax" ? or does it just rely on the default that is normally "free of tax" anyway.

Getting there. Got all the values for property, bank acccounts, etc. and think I am now just waiting on a quote from a stonmason.

The will contains a specific bequest in the form of a property and to one individual and 'free of all tax'. All the other bequests are specific cash sums also "free of all tax" and these have no other definitions such as 'from my XYZ account'.

I think, over the weeks, I've got my head around how the final distribution will work but will still get a professional to advise for the sake of peace of mind.