Inheritance tax question

Big_dopey

About 7 years ago my stepmothers brother died and his estate was valued at approx £1.3million........this money was left to some relations in Canada......however until my stepmother (his sister) died the money was kept in a trust and she received monthly interest payments......my step mother has now passed away and payments have stopped and a small overpayment has to be refunded from her estate.......the suggestion has now been made by her brothers solicitor that her estate is libel for inheritance tax on the interest she has received.....this interest amounts to approx £150,000 in total over about 6 years....... Would she be libel to pay tax on this amount......and what would the situation be if she had nothing left?......as it happens she has a estate valued at about £580,000 and I am executor and main beneficiary.(she has a IHT allowance of £650,000)
Thank you

dzug1

Has she not been paying income tax on the interest payments (the trustees would normally pay them and she'd get the credit). Could it be that the solicitor is talking about this? Inheritance Tax doesn't sound right.

But it might depend on the way the trust was set up

getmore4less

Go through the IHT400 forms and notes.

look for anywhere that deals with trust income.

I would be asking HMRC or a tax specialist.

google : HMRC IHT income from trusts
might help with some HMRC manual pages

Does your step mother benifit from a transferable nill rate band from spouses if not then there is a tasty tax bill.

Big_dopey

getmore4less wrote: »

Go through the IHT400 forms and notes.

look for anywhere that deals with trust income.

I would be asking HMRC or a tax specialist.

google : HMRC IHT income from trusts
might help with some HMRC manual pages

Does your step mother benifit from a transferable nill rate band from spouses if not then there is a tasty tax bill.

Thanks, I have amended my topic post....she has iht allowance from my father

Big_dopey

dzug1 wrote: »

Has she not been paying income tax on the interest payments (the trustees would normally pay them and she'd get the credit). Could it be that the solicitor is talking about this? Inheritance Tax doesn't sound right.

But it might depend on the way the trust was set up

Thanks for that,
Google search says......the trustees are responsible for paying tax on income generated by the fund on a annual return....the balance is then paid to the beneficiary ....... The fact they are now raising questions makes me wonder if they have been doing this......where would that leave me?.

xylophone

Interest in possession trust? Look here?
http://www.hmrc.gov.uk/trusts/types/IIP.htm