IHT and Property

NeilCr

The ongoing saga with the will that I am a beneficiary from !

This doesn't effect me but impacts on a fellow beneficiary and I am trying to support her at the moment.

She is the partner of the gentleman who died. No marriage or civil partnership. The total amount of the will is in excess of £1million. There are two properties involved - one which was owned outright by the gentleman (valued at £500k) - the other was jointly owned (I don't know whether or not tenants in common or joint tenants). This house is valued at £230k. Much of the will is to charity and, I have been told, the IHT is in the region of £50k.

The executor has now said to this lady that she is responsible for the IHT, My, general, knowledge is that IHT normally comes out of the estate.

The lady is going to contact the solicitor involved with the estate to see if she can glean any more about this.. The executor is somewhat awkward (in a nice sort of way) and we do have some concerns about how he is conducting affairs but that is not the point of this post.

I fully understand that I haven't got all the information (I haven't seen the will) and that it is going to be difficult to answer this, specifically. As I say she is seeking some clarity from the solicitor

But, in general, does anyone know of any instances where an individual could be liable for IHT for a property?

Flugelhorn

the IHT should come out of the estate - only issue would be if the house was TIC then she only owns half of it and the rest would be part of the estate I presume and hence would be subject to IHT.
Did he leave her his half of the house?

NeilCr

Flugelhorn wrote: »

the IHT should come out of the estate - only issue would be if the house was TIC then she only owns half of it and the rest would be part of the estate I presume and hence would be subject to IHT.
Did he leave her his half of the house?

Thanks

To be honest I am presuming he did. As I say I haven't seen the will and all this is from a bit of a distance. I don't think she knows the full details, herself. He dealt with all that side of things. I do recognise that this is a bit vague so was wondering if there are any ways an individual could be responsible for IHT

I am guessing TIC because there is IHT involved - from what I know the individual bequests total under £325k - the rest is all to charity

Even if it is TIC and there is IHT would it not come from the estate and not be her responsibility?

Dox

NeilCr wrote: »

But, in general, does anyone know of any instances where an individual could be liable for IHT for a property?

Yes and no! Depends on the wording of the will. If a gift is left 'free of tax' (or words to that effect) it means that the beneficiary receives the full amount of any gift, be it a tangible asset or an amount of cash. Any tax payable comes out of the remainder of the estate.

If the will stipulates that the beneficiary should receive the gift 'net of tax' (again, words to that effect), it means their bequest is reduced by the amount of any tax payable on their inheritance. I suspect this is what the executor is driving at, albeit technically the estate pays the IHT and the beneficiary receives the post-tax amount.

A beneficiary can't be held personally responsible for IHT payable on bequests other than whatever it is they have been left in the will. Their bequest could be further reduced if the remainder of the estate doesn't cover the total tax bill.

Not sure from your post if probate has already been granted. If so, download a copy of the will for £1.50: https://www.gov.uk/search-will-probate

NeilCr

Dox wrote: »

Yes and no! Depends on the wording of the will. If a gift is left 'free of tax' (or words to that effect) it means that the beneficiary receives the full amount of any gift, be it a tangible asset or an amount of cash. Any tax payable comes out of the remainder of the estate.

If the will stipulates that the beneficiary should receive the gift 'net of tax' (again, words to that effect), it means their bequest is reduced by the amount of any tax payable on their inheritance. I suspect this is what the executor is driving at, albeit technically the estate pays the IHT and the beneficiary receives the post-tax amount.

A beneficiary can't be held personally responsible for IHT payable on bequests other than whatever it is they have been left in the will. Their bequest could be further reduced if the remainder of the estate doesn't cover the total tax bill.

Not sure from your post if probate has already been granted. If so, download a copy of the will for £1.50: https://www.gov.uk/search-will-probate

Thank you too!

That is interesting

I should have said probate not yet granted. I will get a copy when it becomes available. It's been a bit of a grind so far, to be honest

Flugelhorn

the problem that the lady may have if the house is TIC is how she is going to afford to buy out the other half of the house if he didn't leave it to her. Also as Dox says, depends whether the gift was net or free of tax.
Need the proper info if you are trying to help her

NeilCr

Flugelhorn wrote: »

Need the proper info if you are trying to help her

Yes I know

:)

There are some other things that I am helping with which are clearer. Just this one where I was, at least, trying to understand any possibilities without full knowledge.

My friend who died was talking about making me the executor which would have made the whole thing easier. The executor, while trying to do the right thing, is somewhat muddying the waters

Anyway - onwards and upwards

My thanks to you and Dox for giving some me thinking matter!

Murphy_The_Cat

Could it be that the other beneficiary has been left an asset/building/business that falls into the grey area of Business Property Relief ? i.e they have been willed an asset/business/property that may or may not benefit from BPR - if it doesn't they still get the asset/business/property but they have to pay the IHT on it ?
IHT & BPR

NeilCr

Murphy_The_Cat wrote: »

Could it be that the other beneficiary has been left an asset/building/business that falls into the grey area of Business Property Relief ? i.e they have been willed an asset/business/property that may or may not benefit from BPR - if it doesn't they still get the asset/business/property but they have to pay the IHT on it ?
IHT & BPR

No.

Both the properties are private dwellings

The deceased owned and lived some of the time in a flat (£500k) and jointly owned and lived the rest of the time with his partner in another flat (£230k).

aliby21

Is the executor perhaps just investigating the best practical way of paying the IHT bill? Given that IHT has to be paid before probate is granted it is not unknown for executors and/or beneficiaries to pay the IHT out of their own pocket to be reimbursed from the estate when probate is granted, especially when most of the estate is tied up in property or other illiquid assets that can't be sold till after probate is granted.

getmore4less

NeilCr wrote: »

Thanks

To be honest I am presuming he did. As I say I haven't seen the will and all this is from a bit of a distance. I don't think she knows the full details, herself. He dealt with all that side of things. I do recognise that this is a bit vague so was wondering if there are any ways an individual could be responsible for IHT

I am guessing TIC because there is IHT involved - from what I know the individual bequests total under £325k - the rest is all to charity

Even if it is TIC and there is IHT would it not come from the estate and not be her responsibility?

£50k IHT would need assets in excess of 450k going to beneficiaries.

TIC or joint does not change the asset contribution to the total for IHT.


Based on that there is no IHT unless there has been gifting

You need the inventory and account.