Inheritance Tax Form IHT205 Question

Jinto

Hello,
I am trying to deal with the probate and inheritance tax for my recently departed mother.
She spent the last few years of her life in a care home and had very little in the way of personal possessions or savings however she still had half of the family home (tenants in common) which my father still lives in. As she had very little savings and my father is a pensioner we were hoping to save him the costs of solicitor by doing the probate ourselves.
I have a question about the inheritance tax form IHT205 that I would be grateful for any advice on.
The estate will be well below the inheritance tax band and she left most of what she had to my father so again this will be exempt however she has left her share of the house to myself and my sister to be held in trust. I believe I will have to get the house valued to declare this 50% of house but after they purchased the property they then purchased an additional plot of land which now forms part of the garden but has been registered separately (Also tenants in common).
Do I need to get this plot valued as a separate asset as her share has also been put to the trust or would a valuation of the whole property be sufficient?
My father once applied for and was granted planning permission for this plot but this has now lapsed.

Yorkshireman99

Jinto wrote: »

Hello,
I am trying to deal with the probate and inheritance tax for my recently departed mother.
She spent the last few years of her life in a care home and had very little in the way of personal possessions or savings however she still had half of the family home (tenants in common) which my father still lives in. As she had very little savings and my father is a pensioner we were hoping to save him the costs of solicitor by doing the probate ourselves.
I have a question about the inheritance tax form IHT205 that I would be grateful for any advice on.
The estate will be well below the inheritance tax band and she left most of what she had to my father so again this will be exempt however she has left her share of the house to myself and my sister to be held in trust. I believe I will have to get the house valued to declare this 50% of house but after they purchased the property they then purchased an additional plot of land which now forms part of the garden but has been registered separately (Also tenants in common).
Do I need to get this plot valued as a separate asset as her share has also been put to the trust or would a valuation of the whole property be sufficient?
My father once applied for and was granted planning permission for this plot but this has now lapsed.

You need some professional advice from a RICS or similar on the valuing particuilarly as the separate plot my have developement potential. It is possible that this may push the estate into IHT teritory. You maybe able to complete the probate yourself but not without paid advice from an IHT specialist as well.

Jinto

OK Thanks, I'm pretty sure that even if it was valued as development land, as we are only looking at 50% of the value it would still be well below the IHT threshold. the full value of the house is only going to be in the region of £250K.

getmore4less

The key is the trust

Does the will specify a life interest?

if it does then you are dealing with an "Immediate post death interest" trust that gets the spouse exemption.

Jinto

getmore4less wrote: »

The key is the trust

Does the will specify a life interest?

if it does then you are dealing with an "Immediate post death interest" trust that gets the spouse exemption.

Thank you, if I understand you correctly then yes, the trust gives my father the right to live in the property for the rest of his life. are you saying therefore that the 50% left to us in the trust does not form part of the inheritance tax calculation at this stage?


If so then there would be nothing to declare on the IHT form and we wouldn't need to get the property and land valued?

Yorkshireman99

Jinto wrote: »

Thank you, if I understand you correctly then yes, the trust gives my father the right to live in the property for the rest of his life. are you saying therefore that the 50% left to us in the trust does not form part of the inheritance tax calculation at this stage?


If so then there would be nothing to declare on the IHT form and we wouldn't need to get the property and land valued?

The problem is that HMR&C are likely to involve the District Valuer. Remember it is not only the IHT that needs to be considered but any future CGT. If you have a professional valuation subsequently agreed by the DV then you have a solid base figure to work from. Trying to do this after a few years is likely to be a nightmare. You should not try and DIY this. A few hundred pounds spent now is a wise investment.

Jinto

yes I want to do it properly, I don't want problems down the line. I'm just trying to understand the implications and procedures.
This may seem a stupid question so forgive my ignorance but if the lifetime interest trust makes the transfer tax exempt then isn't the current value irrelevant? wont it be valued when the estate is eventually passed on when my father dies.
I mean there is no need to value a property that is passed to a spouse or am I wrong?

getmore4less

Jinto wrote: »

Thank you, if I understand you correctly then yes, the trust gives my father the right to live in the property for the rest of his life. are you saying therefore that the 50% left to us in the trust does not form part of the inheritance tax calculation at this stage?

If so then there would be nothing to declare on the IHT form and we wouldn't need to get the property and land valued?

What you have is an Immediate post death interest trust.
often referred to as IPDI trust (also life interest, interest in possession.
(loads of example out there to explain these in more detail)

You need to check the details of how to report it and what happens if assets like the plot of land get sold before the second death.

These assets get full spouse exemption going into the trust and don't use up any transferable nil rate band.

The trust assets remain part of the survivors estate for future IHT calculations on their death(no CGT).
If going to children gets both transferable nil rate bands.

With just a house that is lived in these are straight forward, the plot of land needs research/advice.

Jinto

Thank you all for your responses, I think I will visit a solicitor to seek specific advice on the declaration of the trust but try to do as much as I can of the rest myself.

Yorkshireman99

Make sure you use a solicitor who is a trust specialist I.e. a STEP member.