Inheritance Liability.

davidwm

Has anyone experienced, or has any advice on the following situation.
My father lived with his mother up until her death in 1998. My grandmother left a will leaving the house to my dad. Unfortunately for the past 16 years my dad has basically become a border. He was very reluctant to allow any of the family to visit and no one had seen inside the property for a number of years. At Christmas my dad was taken ill and social services and the police had to gain access. After an assessment social services offered dad a place in respite care. We had a psychiatric assessment which Gave a diagnosis of extreme hording. On visiting the property it was shocking to see the state of the place. (Very similar to the border programmes currently on TV. The property is a 6 bedroom double fronted house with large garden in quite a nice area of London. (Next door recently sold for 1.6 million!!!)
So, finally to get to the point. What is the position on inheritance tax. I would guess the house was probably worth in the region of 4/5 hundred thousand in 1998. My dad obviously realises he has a tax liability but does anyone have an opinion on the way forward. Will he have to pay interest and penalties for example?? Any help appreciated.

Crabapple

Are you saying that the house was not formally transferred to your father in 1998?

Either way he will have inherited it at the value at that date and Inheritance Tax would certainly have been due on your grandmother's estate if the house was worth that much then.

If her estate was administered and dealt with then, then there is no problem and no tax liability now, especially as it has been his residence so no CGT.

If not, you'll need to get a proper valuation done, by a chartered surveyor (not just an estate agent) who should be able to give a value for the property back then as well.

Realistically the house will need to be sold and taxes paid, the remainder will be your dad's money and help pay for his care. The liability will be the IHT bill due on her estate (so on the historic value of the house plus the rest of her estate) plus interest. HMRC can work that out for you but if there's a tax bill get it paid asap to avoid any more interest accruing.

Firstly check what (if anything) was done when your grandmother died.

davidwm

Thanks for that. In answer. Dad did nothing at all on grandma's death!!!!!

BobQ

davidwm wrote: »

Thanks for that. In answer. Dad did nothing at all on grandma's death!!!!!

Someone must have buried your grandmother, which means someone registered her death. Did she have a solicitor? Did she have other property?

You say she left a Will? Unless you know for certain that Probate was not granted at the time then you should check to see if someone executed her will and sorted that out. Could Dad have just got a solicitor to sort it all out. Have you checked if the house is now in his name? You could check if Probate was granted. If so someone must have resolved IHT at the time. If not then you need to sort that out as above based on the valuation at the time.

davidwm

Dad's sister arranged funeral but as the rest of the siblings knew the property was willed to dad they had nothing to do with anything on the house. The will has recently been found which leaves the property to him. The house is in gran & granddad's name on land registry so I presume probate will be needed.

Land_Registry

davidwm wrote: »

Dad's sister arranged funeral but as the rest of the siblings knew the property was willed to dad they had nothing to do with anything on the house. The will has recently been found which leaves the property to him. The house is in gran & granddad's name on land registry so I presume probate will be needed.

Yes - your post suggests that your grandmother outlived your grandfather so if she became the sole surviving owner after his death then her executor(s) would normally have then dealt with the property once probate had been granted.
If the register simply states both their names and address and nothing else then it may be quite straightforward to resolve.

We would always recommend legal advice but it may also be worth checking with the Probate service to confirm their expectations re your grandmother's will on the assumption it was of course recorded with them.

They may also help to advise on who might be best placed to apply for Probate as I assume it will not be Dad.

Once probate is obtained then providing you have an official copy of grandfather's death certificate then the executor(s) should be in a position to sell the property without first registering Dad as the owner. The executor(s) would then deal with the proceeds of sale in accordance with the will.

I am sure others can continue to help with the legal aspects inc inheritance liability etc

BobQ

Land_Registry_representative wrote: »

Yes - your post suggests that your grandmother outlived your grandfather so if she became the sole surviving owner after his death then her executor(s) would normally have then dealt with the property once probate had been granted.
If the register simply states both their names and address and nothing else then it may be quite straightforward to resolve.

We would always recommend legal advice but it may also be worth checking with the Probate service to confirm their expectations re your grandmother's will on the assumption it was of course recorded with them.

They may also help to advise on who might be best placed to apply for Probate as I assume it will not be Dad.

Once probate is obtained then providing you have an official copy of grandfather's death certificate then the executor(s) should be in a position to sell the property without first registering Dad as the owner. The executor(s) would then deal with the proceeds of sale in accordance with the will.

I am sure others can continue to help with the legal aspects inc inheritance liability etc

OP IHT has to be dealt with at the time that you apply for Probate. HMRC have a very helpful helpline:

http://www.hmrc.gov.uk/news/new-tel-numbers.htm

Basically, you cannot get a Grant of Probate until you have agreed with HMRC how any IHT will be paid. You have to fill in the Probate application and the IHT form and send them to HMRC. The forms get processed together.

http://www.nationwide.co.uk/about/house-price-index/house-price-calculator

This suggests a house in Greater London worth 1.6m would have been about 550K in 1998. (That suggests IHT would be on about 800K of gain).WRONG

hardpressed

There is the possibility that if Inheritance Tax wasn't payable on Grandad's estate then his allowance may have passed to Gran.

getmore4less

hardpressed wrote: »

There is the possibility that if Inheritance Tax wasn't payable on Grandad's estate then his allowance may have passed to Gran.

Transferable nil rate band was introduced for second deaths after 9 Oct 2007

getmore4less

BobQ wrote: »

This suggests a house in Greater London worth 1.6m would have been about 550K in 1998. That suggests IHT would be on about 800K of gain.

IHT does not apply to gains it is based on asset values at Date of death..

Also the initial issue here is the death in 1998 and any taxes due at that time on the value at that time.

claire21

Ouch, what happened about IHT when your Gran died?

Edit sorry just saw above, nothing was done.