Inheritance tax and vulnerable people

Owain_Moneysaver

The brothers don't necessarily have to sell the house and move.

Sale-and-rent-back would change them into tenants but would affect benefits and private tenants do not have security of tenure.

Equity release could be used to pay IHT due and would be repaid by the sale of the house after the death of both brothers.

Neither option should be considered without appropriate specialist and impartial advice.

It should also be noted that you must pay Inheritance Tax by the end of the sixth month after the person died, otherwise interest/charges will be applied. Payment on account of an approximate account can be made if the exact tax due is not known. Any overpayment will be refunded with interest.

A first step would be to check for the father's will at the probate registry as this will give an indication of the value of the estate and whether all the allowances were transferred to the mother at that time.

Tammykitty

unforeseen wrote: »

I read it that the £125k only applies on the mother's death as that is the one that transfers the property to a direct descendant.

No it is also transferable, father passes his share of estate to wife, wife can use his £125k allowance to pass estate to children

unforeseen

Reading the guide, the father is only passing the £325k nil rate band to the spouse as it is not going to a direct descendant. The additional threshold of £125k will only be added for the mother's death. In fact their calculator only seems to give the option for the additional threshold for the deceased and not part of any nil rate band from a deceased spouse.

The father's nil rate band will have passed to the wife on his death.
If I am wrong on my interpretation above then the other thing is the additional rate is not available for deaths before April 17 so if the father died before this then it will not be available

Tom99

unforeseen wrote: »

Reading the guide, the father is only passing the £325k nil rate band to the spouse as it is not going to a direct descendant. The additional threshold of £125k will only be added for the mother's death. In fact their calculator only seems to give the option for the additional threshold for the deceased and not part of any nil rate band from a deceased spouse.

The father's nil rate band will have passed to the wife on his death.
If I am wrong on my interpretation above then the other thing is the additional rate is not available for deaths before April 17 so if the father died before this then it will not be available

[FONT=Verdana, sans-serif]Wrong on both counts:[/FONT]
[FONT=Verdana, sans-serif]
[/FONT]“[FONT=Verdana, sans-serif]Unused additional threshold[/FONT]
[FONT=Verdana, sans-serif]Any additional threshold that’s not used when someone dies can be transferred to their husband, wife or civil partner’s estate when they die. This can also be done if the first of the couple died before 6 April 2017, even though the additional threshold wasn’t available at that time.”[/FONT]

[FONT=Verdana, sans-serif]https://www.gov.uk/guidance/inheritance-tax-transfer-of-threshold[/FONT]

Keep_pedalling

One thing the executor will need to do is get a proper paid for valuation of the house. The estate sounds like it is going to be boarderline tipping Ito IHT range, so a challenge to any valuation provided by an estate agent is l8kely to be challenged.

If the value of the house exceeds £900k then IHT will need to be paid.

Sibbers123

You need professional advice. The amount of tax at stake is potentially huge! You may have to pay for the advice, but I guarantee you, it will save you far more in the long run.

The deceased could have up to £900k free for IHT but this depends on a number of things!

reddefender

As per Linton above, it does rely on father having left everything to mother and having died after 1971.

]
The father died intestate 7 years ago so I'm not sure if the house would have automatically passed to his widow. I don't want to ask my friend too many questions just yet as the funeral is Monday and his head is elsewhere.

Keep_pedalling

reddefender wrote: »

]
The father died intestate 7 years ago so I'm not sure if the house would have automatically passed to his widow. I don't want to ask my friend too many questions just yet as the funeral is Monday and his head is elsewhere.

It is most likely that the home was owned as Joint Tennants so the property would be in the sole ownership of your friends mother.

If he checks the land registry and there are no restrictions in section B, then you can say with certainty that it was a JT, and the entire property currently belongs to her estate.

It sounds like neither brother has any direct decendsnts, so if not already in place they both need to sort out their own wills.