IHT Twice?

Sappy123

Hi, I have recently lost both my parent and my nan, separate incidences 4 months apart and have been left 50% of my parents home (with my sibling having the other 50%) along with 25% of my Nan's property with my sibling having 25% and uncle having the remaining 50%. 
With regards to inheritance tax, how will this work. Is the tax free allowance separate for each inheritance or is my £325k limit spread across both? Also is it £325k as my parents leaving their ownly home to my brother and I or does this increase to £500k tax free now and again, is this just for my parent estate and then separate, £325k limit for my Nan's?

Thank you

nanapop1977

Firstly sorry for both your losses - this must be a difficult time for you. Inheritance tax is paid on the value of the estate (before any money is paid to beneficiaries) so your relatives estates will be treated separately by HMRC. There are ways to increase the threshold at which IHT is paid and the estate executors of your relatives' wills will need to look into whether this is possible in your case (if there is a property involved it sounds as if the Residential Nil Rate Band could be used for example). You could try looking for the IHT section of gov.uk - it might help you get to grips with the taxation bit of inheriting from relatives. 

pip895

Sappy123 said:

Hi, I have recently lost both my parent and my nan, separate incidences 4 months apart and have been left 50% of my parents home (with my sibling having the other 50%) along with 25% of my Nan's property with my sibling having 25% and uncle having the remaining 50%. 
With regards to inheritance tax, how will this work. Is the tax free allowance separate for each inheritance or is my £325k limit spread across both? Also is it £325k as my parents leaving their ownly home to my brother and I or does this increase to £500k tax free now and again, is this just for my parent estate and then separate, £325k limit for my Nan's?

Thank you

The deceased person/their estate has the allowance not you.  Did your parents predecease your Gran?  Depending on circumstances both estates could have separate allowances of up to a million (£500k/person in a couple)

Sappy123

Thank you for responses so far. My nan passed away first, April 2020, with my Dad end of July and Mum early Sept 2020, surviving my dad by 34 days. My nan is survived by her husband, however he is not mentioned in the will as inheriting.

Flugelhorn

I am sorry to hear that you have had such an awful year. 
Re Nan's husband - where is he living? just thinking whole thing might be tricky if he is living in the house still.
Anyway as others say - there will be an allowance for gran's estate and IHT paid on any excess before the money comes to you. Then for your parents - did they leave a will? did the Dad leave everything to Mum first?

xylophone

IHT is the tax levied (where payable), on the estate of the deceased person.

Assuming that your  late grandmother made no non exempt gifts in the seven years before she died, her estate benefits from her nil rate band. 

You speak of her "property". Do you mean her main residence? Was she the sole owner? Her surviving widower owned no part of the property?

The "uncle" is her son?

If so, then her estate also benefits from the "main residence nil rate band"  as it has been left to her direct descendants.  

With regard to  your  late mother's estate, assuming that she made no non exempt gifts before she died, this benefits from her  NRB and MNRB with the possibility of the transferable NRB and transferable MNRB, depending on the situation with regard to your late father's estate.

https://www.gov.uk/guidance/inheritance-tax-transfer-of-threshold

https://www.gov.uk/inheritance-tax

https://www.gov.uk/applying-for-probate/apply-for-probate

Sappy123

You are all so kind coming back with responses so quickly. To provide some clarification, my nan left a will naming my uncle and my father as sole beneficiaries with my Nan's husband reserving right to live in the property until death, when my dad passed, as he outsurvived my nan by several months I believe he "inherited" despite probate not being completed. My dad's will left everything to my mum. My mum outsurvived my dad by 34 days and therefore, I believe again "inherited" from dad. My mums will in turn leaves everything to my brother and I so I believe my Nan's house will now be split 50% to my surviving uncle (dad's brother/Nan's son) and 25% each to my brother and I (the share that would have been my dad's and then my mums).

As my Nan's house is being left to one of her son's, will this increase the IHT threshold to £500k including the resident nil rate band. And the same for my parent house? Both my Nan's and my mums properties were sole residences?

Does the fact my Nan's husband retain the right to live in my Nan's house impact this at all from an IHT perspective? (I appreciate the awkwardness but let's leave that to one side for now!)

Thanks again you amazing people.

nanapop1977

Are you an executor to any of the wills? If so you might wish to seek the advice of a professional  (solicitor or accountant for example) as this sounds less than straightforward.  In my local area they seem to charge around  £1000 - 1500 to apply for Probate/IHT report  (although we did ours ourselves in the end). It might be money well spent though to save yourself some stress at this difficult time.

Sappy123

Hi, yes I am executor to my mums estate but not my Nan's. 
Just another thought too, with my brother and I effectively due inheritence from my nans estate through my mum, would this not mean that my Nan's estate is actually part of my mums estate as far we are concerned and therefore subject only to my mums tax free allowance?

xylophone

 To provide some clarification, my nan left a will naming my uncle and my father as sole beneficiaries with my Nan's husband reserving right to live in the property until death, 

Are you saying that your grandmother's will  created an "interest in possession Trust" in favour of her widower with both her sons the "remainder men"? 

I ask the question because you speak of her widower's "reserving the right to live in the property" - on what grounds did he reserve this right if he had no beneficial or legal ownership?

Are you saying that he made a claim against your grandmother's estate for provision?

Assuming that this is a straight "immediate post death interest in possession" in favour of the spouse, the likelihood is  that your father's interest vested (became his) when she died and that  therefore on his death, became part of his estate.

http://trustsdiscussionforum.co.uk/t/what-happens-if-one-of-the-residuary-beneficaries-of-a-life-interest-estate-dies/4709/4

With regard to  your grandmother's will, was the property her only asset or were there other assets (cash etc) that were left to beneficiaries other than her spouse?

If this was the case, then it is possible that all or part of her NRB has been used.

If there is an IPDI, then the value of the property falls to be taxed on the death estate of her widower. The property would be registered in the name of your Uncle as sole surviving Trustee of the IPDI - it may well be that some restriction would need to be registered on the title to protect the interest of you and your brother (which derives from the interest inherited by your mother on your father's death).

With regard to your late mother's will, it seems that she has her full NRB and MNRB with transferable NRB and MNRB.

Are you the executor of  any or all three wills?

All the above would need to be checked by a suitably qualified solicitor - a STEP member would be best? 

https://content.step.org/step-directory

Mojisola

Sappy123 said:

Thank you for responses so far. My nan passed away first, April 2020, with my Dad end of July and Mum early Sept 2020, surviving my dad by 34 days. 

There are three estates to deal with, not two.