Transfer of nil rate band question

hjghg5

I am joint executor of my grandfather's will with my sister. I'm a solicitor so am comfortable with the legal process but not a probate/tax law specialist so am not particularly familiar with the tax forms.

For background my mother was an only child and died a couple of years ago so my sister and I (and her kids) are his only descendants. The will is 30% me, 30% my sister, 30% split between her kids and 10% to my sister's husband (I'm unmarried).

When my grandmother died she didn't have a will and left everything to my grandad. The estate is about £350-400k (including a house) so filling the transfer of nil rate band form in seems to be the simplest way to go about things.

All seemed straightforward until I got to question 13 on form 217 - did the deceased (my grandmother) benefit from a trust during their lifetime. Does this mean at any point during their lifetime or only at the point of death? Her father left his business in a trust which gave a life interest to her mother then transfered to my grandmother and her brother on their mother's death but this was finished about 40 years before my grandmother died. The shares came out of the trust, she was a director/shareholder for a while then sold up to her brother. From a tax point of view surely the only relevant things would be matters within 7 years of death and this isn't relevant but I wanted to check I'm not missing something. I can give hmrc a call if necessary but wondered if anyone knew the answer!

Keep_pedalling

Yes that is somewhat confusing, as I cant see how such an old trust has any impact now, and if you jump to form IHT402 as it tells you to. it only mentions a trust that the first partner to die was benefiting at the time of death. I think a call to HMRC is required for full clarity.

Going slightly off on a tangent, with an estate that size with a property involved, and the bulk of his estate going to direct descendants, you don't actually need to transfer any of his wife's NRB as his estate can claim his primary residence nil rate band, meaning his estate would need to exceed £425k before the transferable nil rate band would be required.

That does require IHT400 to be completed, as there is nowhere to claim it on IHT205 as it has not been updated for 8 years.

hjghg5

Yes, I looked at that option but the paperwork looked easier to transfer the nil rate band! In the end we'll get to the same position it's just working out which is the simplest route from a form filling point of view.

eddyinfreehold

I don't know if I can help here directly because the forms have changed and I assume you are going down the 'online' route and not sending in hard copies. There are two reasons for answering your query. Firstly my mother tranferred all her estate to my father when she died in 1970, and secondly she was supposed to benefit from a Trust when her mother died. She predeceased her mother and when her mother died the Trust had been exhausted so her Estate never benefitted at all. Our solution was to provide copies of all the documents we had with the IHT forms and a short explanatory narrative too.

I don't know if it did us any good or not in the long run, but the transferrable allowance has calculations that go back beyond the days of IHT as far back as Estate Duty when even married couples were treated separately. It may be that your mother benefitted from a Trust and as a consequence part of her transferrable allowance has been used up. Going by the figures you give, it hardly matters as IHT should not be payable anyway unless her benefit from the Trust consumed almost all of her transferrable allowance

Our solicitor's advice was to provide HMRC with all the information you have to hand and let them decide how to proceed. As long as you do this honestly you have the moral high ground.

What I do know is that it took more than six months from submitting the forms to getting the initial assessment back from HMRC, another month before getting a Grant of Probate, and a further year to having the process completed with HMRC. They were more interested in an accurate valuation of the property than in the Trust. The case was sent to HMRC Compliance where it languished for 10 months with no action. Only in the last two months has the case been resolved.

hjghg5

I'm mainly using the forms at the moment to work through and write notes on to check we've got everything we need, haven't decided yet whether to go down the online route - are the questions very different and is there a way to see them all before you get round to filling it in? If the wording of the question is slightly different it might solve the problem.

I've ordered a copy of the 1948 will that set up the trust to check if there's anything useful in there (I know there was a trust because I've seen the trust accounts in the paperwork relating to the business but never knew about it before then). The trust ended in around 1974 which was before I was born.

If I go down the IHT400/402 route the question is worded slightly differently and talks about assets in trust at the date of death so I'm relatively happy there won't be an issue but if we can use the simpler forms it would be my preference as it will hopefully be easier and quicker (famous last words!)

Keep_pedalling

hjghg5 wrote: »

I'm mainly using the forms at the moment to work through and write notes on to check we've got everything we need, haven't decided yet whether to go down the online route - are the questions very different and is there a way to see them all before you get round to filling it in? If the wording of the question is slightly different it might solve the problem.

I've ordered a copy of the 1948 will that set up the trust to check if there's anything useful in there (I know there was a trust because I've seen the trust accounts in the paperwork relating to the business but never knew about it before then). The trust ended in around 1974 which was before I was born.

If I go down the IHT400/402 route the question is worded slightly differently and talks about assets in trust at the date of death so I'm relatively happy there won't be an issue but if we can use the simpler forms it would be my preference as it will hopefully be easier and quicker (famous last words!)

Whichever route you go down you will have to use IHT400 & IHT402 / IHT435. The fact that you know there was a trust forces you down this way on the transferable nil rate route even though you don’t actually need to declare it on IHT402. Residents nil rate band can only be claimed using 400 & 435 (436 can be used to transfer partners residence NRB if required)

Like you I would work though this with paper copies, you can always transfer this info on line once you have nailed it. I think the simplest path in this case is to use his allowances only, unless you unearth some hidden assets that take the estate over £425k.

eddyinfreehold

Page 15 of the IHT400 allows you to explain any anomalies you might feel need to be declared. Having the Trust accounts might help you have a better picture.

The one thing I would do which might speed the whole process up is to get TWO valuations of the property and chattels done by authoritative RICS surveyors. As long as they vaguely concur, this may help you progress administration without Compliance being called in. I think our mistake was only using one. Just estimating the value yourself is inviting Compliance to get involved. Bit off topic. Sorry.

eddyinfreehold

Like you I would work though this with paper copies, you can always transfer this info on line once you have nailed it. I think the simplest path in this case is to use his allowances only, unless you unearth some hidden assets that take the estate over £425k.

I very much agree with this last sentence