Inheritance Tax. Who pays and how much?

holly_hobby

No ... please re-read my post.

Essentially and to keep it simple, if her Husband left his entire estate to her, her administrator may have hubbys unused nil rate band of 325k added to hers of 325k = 650k total nil rate exemption applicable against her net estate.

Which means if her net estate is worth 500k (as you say), and if Hubbys full allowance is available for tsf - she (her estate) essentially has 650k IHT exemption.

Which means that as her estate is below this figure, her estate has no IHT liability ... (assuming as I say, he and she didn't make any non-exempt tsfs pre death, and for clairty the above is a simplified explanation for ease of general understanding).

So on this basis, there is £0 IHT due by her estate, you or any other beneficiary.

This is complex for the layman, and is for you to have an idea about, but the executor/administrator to understand and take in hand, as its they whom are duty bound to deal with any tax, and should contact and discuss with HMRC to ensure they don't leave her estate exposed to IHT where it doesn't need to be.

Hope this helps

Holly

xylophone

As Holly Hobby says, the executor is responsible for dealing with the estate.

if the executor does not feel competent to deal, expert advice should be sought, because mistakes in this area can be expensive and difficult and time consuming to correct.
http://www.step.org/ might be worth a look if necessary.

http://www.hmrc.gov.uk/inheritancetax/intro/basics.htm
http://www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm
http://www.howto.co.uk/family/probate-wills/interpreting_a_will_and_deciding_what_bequests_and_liabilities_should_be_fulfilled/

Gimpster

I had read and re read several times actually.

However the executor is the one causing a lot of trouble as they stand to inherit a quarter of the remaining estate they don't want the tax reducing their share.

So could i ask for an answer to my original question as the executor is trying to pull something. Saying for a moment If there WASN'T any tsf then would the IHT only be payable on the £175kmof a mooted £500k estate?

And could that £70k be paid off in instalments? Because that's what I read on the HMRC site which is what brought me here in the first place .

noh

Gimpster wrote: »

I had read and re read several times actually.

However the executor is the one causing a lot of trouble as they stand to inherit a quarter of the remaining estate they don't want the tax reducing their share.

So could i ask for an answer to my original question as the executor is trying to pull something. Saying for a moment If there WASN'T any tsf then would the IHT only be payable on the £175kmof a mooted £500k estate?

And could that £70k be paid off in instalments? Because that's what I read on the HMRC site which is what brought me here in the first place .

Yes the tax due would be 40% of £175K ie £70K.

Some of that £70K could be paid in instalments.
Only the amount of IHT relating to fixed assets (buildings and land) can be paid in instalments. The rest has to be paid upfront.

Mojisola

Gimpster wrote: »

I had read and re read several times actually.

However the executor is the one causing a lot of trouble as they stand to inherit a quarter of the remaining estate they don't want the tax reducing their share.

So could i ask for an answer to my original question as the executor is trying to pull something. Saying for a moment If there WASN'T any tsf then would the IHT only be payable on the £175kmof a mooted £500k estate?

And could that £70k be paid off in instalments? Because that's what I read on the HMRC site which is what brought me here in the first place.

The executor has a legal duty to sort out the estate, not protect their own interests.

The basic thing to remember is that it is the estate that owes the tax, not the beneficiaries.

holly_hobby

Gimpster wrote: »

I had read and re read several times actually.

Oh I see .... I got the impression you hadn't digested the info that had been provided re tsfing of unused spousal exemption to increase your friends 325k nil rate band. I thought this because you answered saying you didn't want to appear thick but did the estate still owe 70k - which as I explianed NO it wouldn't - I also explained why this coudl be the case.

Ok, lets assume that your friends spouse used all of his nil rate band ..... and there is zilch available for spousal tsf application ... unlikely but lets roll with what you want discussed.

Yes the IHT bill to the estate will be 70k - based on the cited net value of 500k & 325k nil rate IHT exemption, BUT only if she hasn't made any other non-exempt tsfs during her lifetime, if she has the liability will obviously be increased.

Paying instalments, and only on particular assets, here you go - http://www.hmrc.gov.uk/inheritancetax/paying-iht/yearly-instalments/

And a breakdown to its application ...
http://www.hmrc.gov.uk/inheritancetax/paying-iht/yearly-instalments/interest-instalments.htm

Executors have a duty to follow a strict law of conduct (thats what they agree to underake in accepting the role), and must administer the estate lawfully, without obstruction, or bias or favour to either themselves or any other individual/beneficiary

There is absolutley no benefit for the executor to expose the estate to unneccsary IHT - unless their sole motivation is to reduce what ALL beneficiares (inc themeselves) may inherit after all debts/taxes have been discharged - otherwise it would be sheer utter madness not to apply all quailifying reliefs and exemptions available !!

IF you believe the executor is acting inappropriately, then you may apply to have the will varied (basis of claim being the manner in which the Estate is being managed or distributed by the executor), with your requirement to have the current executor removed from their role, and replaced with an appointed representative/executor/trustee (eg probate solicitor or other nominated individual whom wishes to take the role). This is, as you would expect, a court process, and you will need a Solicitor to assist - to which of course they will charge for the privilidge.

Holly

Daniel_Elkington

Have you asked the executors?

If the person who originally wrote the will is still at the firm I'd pay them a hundred quid or so just to clarify the situation. You are potentially getting a free house.

Without a copy of the will and TEP after our names it is unlikely you will find the answer here, just more questions.

I would pick up the 'phone and talk to those involved about what the will actually means. Even if this results in an unwanted response you should then ask for a copy of the will and get an independent opinion from a STEP member.

Mojisola

Daniel_Elkington wrote: »

Have you asked the executors?

Gimpster wrote: »

However the executor is the one causing a lot of trouble as they stand to inherit a quarter of the remaining estate they don't want the tax reducing their share.

The executor has a conflict of interests and sounds as if he/she is trying to maximise his/her own inheritance.

xylophone

http://www.lawdonut.co.uk/law/personal-law/probate-executors-and-estate-administration/probate-and-estate-administration-24-faqs

If you as a beneficiary feel that the executor is acting improperly or is incompetent you should see a solicitor.
http://www.step.org/

Gimpster

Holly I really appreciate the help. I think my post confused matters. But I just wanted to clarify from every eventuality so I had my head around things. I have now read through all your replies and think I have everything straight in my mind. I will look into her late husband's position. I suspect, as you say, it should be ok and they can use part of his nil rate thing too which would be ideal.
I feel a lot more confident now in asking some questions.

A huge thank you o everyone that as replied.