DIY Probate - help with understanding transfer of allowances

NinjaTune

Mum died in 2010 and was a joint owner/tenant with my father.  She left her 50% of the house to myself and my brother and Dad had a lifetime interest in the property (I think that's the term - able to live there until death or downsize). 

Mum's estate was just under £225,000 including her half of the property that was valued at £350,000 (so £175,000 for her 50%).  The balance was investments which went to my Dad.

We are now doing DIY probate as the estate is fairly simple (unlike the forms).  Dad owned 50% of the property now valued at £420,000, his investments total approx £205,000 and house contents worth less than £10,000.  As Dad was generous to his children/grandchildren there have been monetary gifts over the last 7 years that add up to around (but possibly less than) £80,000 after the £3,000 a year allowance.  Dad left his 50% of the property to myself and my brother.

Am I right in thinking that the tax allowances are as follows:

Dad - nil rate band of £325,000 plus RNRB of £175,000 (= £500,000)
Mum - transferred nil rate band of £100,000 plus unused allowance of RNRB of £175,000  (= £275,000)

Total amount of tax allowance = £725,000 for the purpose of Dad's estate?

Thank you in advance for any clarification, much appreciated.

NinjaTune

@Keep_pedalling

I noticed that you had posted with advice on a similar thread earlier.  You seem pretty knowledgeable in this area but I didn't want to piggyback on the OP's thread as I will, no doubt, have more questions.  If you are able to help I would be very grateful x

Keep_pedalling

It’s a bit more complicated when trusts are involved. I don’t think your mother’s RDNR is transferable as she left her half of the house to you and your sibling, but as your father’s estate is a tad under his own allowances you don’t need any of the transferable anyway.

NinjaTune

Thank you @Keep_pedalling

I'd worked it out as just over his allowance (210 + 205 + 10 + 80)  but now have a vague memory of a 10% (?) deduction from his 50% share of the house so this would bring it back under the £500,000 allowance.

Is that correct or am I imagining that percentage deduction?  Thank you again.

Keep_pedalling

NinjaTune said:

Thank you @Keep_pedalling

I'd worked it out as just over his allowance (210 + 205 + 10 + 80)  but now have a vague memory of a 10% (?) deduction from his 50% share of the house so this would bring it back under the £500,000 allowance.

Is that correct or am I imagining that percentage deduction?  Thank you again.

I actually missed the £10k in house contents. Not sure if you can claim the discount if the 50% of the house is passing to the owners of the other half as that imposes no restrictions on the freedom to dispose of the house.

You can take off funeral expenses, but you may still need to use your mother’s unused NRB if the value ends up a little bit over £500k. 

NinjaTune

Thank you, much appreciated.

Robert_McGeddon

I’m not seeing a problem.

Dad’s nil rate band          £325,000

Dad’s RNRB                    £175,000 - provided Dad died after 5 April 2020, else a lower sum.

Mum’s TNRB                    £150,000 (325K-175K) – inter-spousal transfer on £50K investments N/a for IHT.

 

So total (before transferable RNRB) £650,000.  Assets per Ninjatune £505,000. So well outside IHT territory.

 

FWIW I’m surprised about the house value.  If it was worth £350K in 2010 I would have expected a ballpark uplift of around 60% by 2020. So maybe worth £560K. £420K seems low.

NinjaTune

Robert_McGeddon said:

I’m not seeing a problem.

Dad’s nil rate band          £325,000

Dad’s RNRB                    £175,000 - provided Dad died after 5 April 2020, else a lower sum.

Mum’s TNRB                    £150,000 (325K-175K) – inter-spousal transfer on £50K investments N/a for IHT.

 

So total (before transferable RNRB) £650,000.  Assets per Ninjatune £505,000. So well outside IHT territory.

 

FWIW I’m surprised about the house value.  If it was worth £350K in 2010 I would have expected a ballpark uplift of around 60% by 2020. So maybe worth £560K. £420K seems low.

Apart from a new boiler it's pretty much been untouched, except for a lick of paint, since it was bought in the 70's so needs updating/modernisation (plumbing, rewiring, new kitchen and bathroom plus downstairs WC, all carpets need replacing, has artex ceilings etc.).  The price I'm guesstimating reflects the work that needs to be done and is based on sale prices in the street over the last 3 years.  I'll be getting EA valuations soon but I doubt they will exceed 420k to be honest.  It will be a beautiful house once the work is done though. 

Keep_pedalling

Robert_McGeddon said:

FWIW I’m surprised about the house value.  If it was worth £350K in 2010 I would have expected a ballpark uplift of around 60% by 2020. So maybe worth £560K. £420K seems low.

That very much depends on the location

NinjaTune

Keep_pedalling said:

Robert_McGeddon said:

FWIW I’m surprised about the house value.  If it was worth £350K in 2010 I would have expected a ballpark uplift of around 60% by 2020. So maybe worth £560K. £420K seems low.

That very much depends on the location

SE England, good transport links, quiet cul de sac in what is considered a 'desirable road', however everywhere has a ceiling price.  I strongly suspect it won't be valued at more than 420k due to the work needed but will be (very) happy to be proven wrong!