Inheritance tax question

Mr_White12

Hi

I wonder if anyone can help me. My late mother left behind a trust fund for myself and my 2 brothers. They consist of three properties. We plan to sell these properties and split the money three ways. Would we have to pay inheritance tax on this? the properties have all dropped in value since when they where bought.

Any advice would be gratefully received

xylophone

As a Trust is involved, you would be well advised to take expert advice.

https://www.gov.uk/trusts-taxes/trusts-and-inheritance-tax

Much depends on the type of Trust.

You might consult the solicitor who drafted the Trust Deed as an initial step - he might well advise consulting a tax accountant as well.

SeniorSam

Mr White 12.

As the Trust was set up after your Mothers death, from her estate, then any inheritance tax would have already been paid by the Executors if it was payable.

If a Discretionary Trust, the Trusteed decide what they wish to do with the Trust assets, but bear in mind that there may be Capital Gains Tax to pay when the properties are sold by the Trust, with less allowance than an individual.

If gifted into the Trust and no CGT was paid at the time, if appropriate, has there been a gain since the Trust was set up. If a gain, then tax may be payable. If a loss then no CGT. Bear in mind also that the Trustees will need to submit a Tax return showing any income the Trust received.

Sam

Mr_White12

SeniorSam

Thank you for your kind reply. The trust was set up before my mothers death. The trust will have made a loss by the time the properties are told. I understand that inheritance tax is payable on assets over 325,000. Collectively the properties would come just above this amount, but Individually we would be receiving a lot less than this each, so Im confused as to whether or not inheritance tax is applicable

Savvy_Sue

It's the total value of the estate as at the date of death which determines whether or not IHT is due, so it sounds as if in your case it is.

Expert advice, as already mentioned, is your friend: you may prefer to do a deed of variation and make some charitable gifts, for example, if you'd rather the money didn't go to the government.

BUT was your mother married or widowed at the time of her death? ie is there another 'pot' of IHT-free allowance you can apply to her estate?

POPPYOSCAR

Savvy_Sue wrote: »

It's the total value of the estate as at the date of death which determines whether or not IHT is due, so it sounds as if in your case it is.

Expert advice, as already mentioned, is your friend: you may prefer to do a deed of variation and make some charitable gifts, for example, if you'd rather the money didn't go to the government.

BUT was your mother married or widowed at the time of her death? ie is there another 'pot' of IHT-free allowance you can apply to her estate?

But if the properties were in trust,and presumably set up for this very reason surely there would be no IHT payable?

Savvy_Sue

Ah yes! Expert advice it is then, I'm talking out of my posterior ...

SeniorSam

Mr White12
You need to explain more detail about this if you require guidance.

Details of the Trust. Was it a Discretionary Trust and how long before your Mother died were the properties gifted into the Trust?

What was the value of the properties when purchased and when? Was anything else given into the Trust at the same time.

What other total assets did your mother own when she died and was she widowed earlier. If so, what date did your Father die, or was there a divorce earlier.

Also, was your mother living in any of the Trust properties once she had given them to the Trust, as this is a very important point.

As you can see, there are so many questions that need answering before correct guidance can be given. That's why seeking professional help is always advised.

Sam

kidmugsy

POPPYOSCAR wrote: »

But if the properties were in trust,and presumably set up for this very reason surely there would be no IHT payable?

Trusts don't give magic exemption from IHT. They are just places to store gifts. So the first question is whether the gift was made seven or more years before death.

SeniorSam

Even when gifting property into Trust, if the Settlor remains in the property and thereby retains the benefit, then it's value remains in the Settlors estate. In such circumstances, unless a full market rent is paid to the Trust, upon which the Trust will pay income tax, the property value remains in the estate of the Settlor.

So many clarifications are needed before any guidance can be given

Sam