Is a legal charge on ex-wife's property part of estate?

Confused_Widow

My husband died recently and I am trying to work out what to include in his estate. When he divorced his first wife a legal charge on her property was set up so that when she dies a particular sum would pass back to his estate. Does the value of this charge count as part of his current estate for inheritance tax purposes? And would IHT on this (above the £325k threshold) be payable now even though the estate may not actually get the money for many years?

G6JNS

Confused_Widow wrote: »

My husband died recently and I am trying to work out what to include in his estate. When he divorced his first wife a legal charge on her property was set up so that when she dies a particular sum would pass back to his estate. Does the value of this charge count as part of his current estate for inheritance tax purposes? And would IHT on this (above the £325k threshold) be payable now even though the estate may not actually get the money for many years?

You need to consult an professional IHT specialist. It is too serious a problem to rely on information from here.

Keep_pedalling

It certainly counts as part of his estate, but assuming that you will inherit most of it and he has not left (or previously gifted in the last 7 years) over £325k to other people then it's your executors who will have worry about IHT not you as none will need paying until you die

You do however need to take professional advice both on IHT planning and getting that charge migrated over to you.

Confused_Widow

I am not the only beneficiary, and the size of the legal charge does take us into IHT territory. I will be using a solicitor to deal with everything, but just wanted to go in with my eyes open. Thank you G6JNS and Keep pedalling for taking the time to respond I think the last user name is good advice in itself!

G6JNS

Confused_Widow wrote: »

I am not the only beneficiary, and the size of the legal charge does take us into IHT territory. I will be using a solicitor to deal with everything, but just wanted to go in with my eyes open. Thank you G6JNS and Keep pedalling for taking the time to respond I think the last user name is good advice in itself!

Quite! It would be nice to know what the solicitor says. Although each case needs to be looked at on its merits it is still useful to know. Good luck.

Keep_pedalling

Yes good luck CW. This raises in interesting question as to what would happen in a similar situation, where a charge against a property puts an estate into IHT territory but there are not sufficient liquid assets to pay it, could the occupant be forced to sell or buy out the charge?

G6JNS

Keep_pedalling wrote: »

Yes good luck CW. This raises in interesting question as to what would happen in a similar situation, where a charge against a property puts an estate into IHT territory but there are not sufficient liquid assets to pay it, could the occupant be forced to sell or buy out the charge?

It also occurs to me that the OP probably has her own and her late husband's IHT threshold so unless the charge pushes the estate over £650 it may not matter?

Keep_pedalling

G6JNS wrote: »

It also occurs to me that the OP probably has her own and her late husband's IHT threshold so unless the charge pushes the estate over £650 it may not matter?

I don't think the OP can use her allowance in her lifetime, so if for example her husband had 1mil in assets and left half of them to other beneficiaries then there would be IHT to pay on 175k and no allowance to be carried over to his widow's estate.

Confused_Widow

Will update when I get the legal advice, and will pose the question of insufficient liquid assets, although it won't apply in this case. Thanks for the good wishes.