Confused by Inheritance Tax Estate Report- Help Needed Please!

Bethany94

Hi, 
I'm in the process of completing an inheritance tax report for my mum's estate and it's proving to be more complicated than I anticipated. I would be very grateful for any advice. I've outlined my main questions below:

• The form states that we have to declare my mum's share of the property that she owns jointly with my dad (her husband). Is this true? I thought anything jointly owned was exempt from inheritance tax. If I do have to enter half of the value of the property will this then count towards the £325,000 threshold?
• In the money section there is an option to enter her share of any jointly owned money. Her and my dad did have some joint bank accounts. Once again, I do not understand why the report is asking about this money as I assumed it would be exempt?
• The household and personal items section seems ridiculous and impossible to estimate accurately. She lived in a house with 4 adults and all items are shared. Would it be okay to not enter any values for this section?
• My mum had a joint life insurance policy with my dad. The form asks me to estimate her share of the policy value. Is this the amount which is due to be paid to my dad now that she has passed away or is it referring to something else?

I'm sorry, I know that I've asked quite a few questions here. I would really appreciate it if someone could answer even just 1 or 2 of them. My mum has passed away very suddenly and unexpectedly and it has been difficult to try and get organised when you are so unfamiliar with the system.

Thank you! 

poppystar

Sorry for your loss. I’ll take the household and personal items question. This was something I questioned with the help line when I first had to deal with this and they said to just put a notional amount in and suggested £500. As long as there is no really valuable jewellery or the like they were happy. Such an amount should also not take it over the iht threshold. It just allows for things like mobiles, cameras, or other such that might rightly be seen as hers. Better something in the box than nothing they said, so no one will query it.

As for the jointly owned accounts and property I think the answer is that it will be taken off later in the completion of the accounts as it passes directly to spouse. I’m sure someone will be along to agree or disagree with that thought. 

naedanger

Is it an HMRC form you are filling in? If so can you give its reference number?

If the property is passing to your Dad then no IHT will be payable and it won't use up the IHT allowance. Similarly if the money in the joint accounts is going to your Dad no IHT will be payable and it won't use up the IHT allowance. Otherwise, if the beneficiary is someone else, IHT may be payable. In any event the amounts do need to be told to HMRC.

Assuming the property is located in England or Wales was it owned as joint tenants or tenants in common? (It makes a difference to where figures are entered but not the actual tax position.)

Re household goods - who is to inherit her share of them? Is it your father or not? What woud be the total value of the goods assuming they were sold?   Also what form and question are you referring to? (The reason for asking these questions is because the amount of detail you need to give will depend on the whether IHT is likely to be payable and the value of the goods.)

Bethany94

naedanger said:

Is it an HMRC form you are filling in? If so can you give its reference number?

If the property is passing to your Dad then no IHT will be payable and it won't use up the IHT allowance. Similarly if the money in the joint accounts is going to your Dad no IHT will be payable and it won't use up the IHT allowance. Otherwise, if the beneficiary is someone else, IHT may be payable. In any event the amounts do need to be told to HMRC.

Assuming the property is located in England or Wales was it owned as joint tenants or tenants in common? (It makes a difference to where figures are entered but not the actual tax position.)

Re household goods - who is to inherit her share of them? Is it your father or not? What woud be the total value of the goods assuming they were sold?   Also what form and question are you referring to? (The reason for asking these questions is because the amount of detail you need to give will depend on the whether IHT is likely to be payable and the value of the goods.)

Thank you for your reply. It is the online form on the Gov.uk website entitled “report the estate’s value to the HMRC”. It doesn’t have a reference number. I was directed to it by gov.uk after attempting to apply for probate as this step needs to be taken first. It has specific sections to declare values for property, money, insurance, household goods etc.

The property was owned as joint tenants and will be passing to my dad, as will the money in the joint account. I’m just concerned because despite it being clear on the form that these assets are jointly held they are still being counted towards the total value of the estate which is being automatically calculated by the online form. 

The household goods are just the usual furniture and electronics you would expect, I have absolutely no idea what it would be worth altogether. Myself, my dad and my sister will be continuing to live in the house so nothing will be sold on. 

naedanger

I did not fill that form in. But very roughly the way I believe HMRC look at it:
What is the value of the deceased's estate i.e. the amount left in the will. It will not include the value of your late mother's joint account or her share of the property (as it was owned as joint tenants).
Say that figure is £600,000.
Then add on the value of deceased's share of the assets that passed to someone else but not via the estate (or will). Say your late mother's share of the house was £250,000 and her share of the joint account was £100,000.
This gives a total of £950,000. (If there were any significant gifts prior to death their value would be added on.)
Then they subtract off exemptions. The key one being the spouse's exemption. Everything left to the spouse is deducted as the spouse's exemption. So if everything was left to your father the amount after exemptions would be £0. Let's say in this example £100,000 in total was left by your late mother to her children and friends. Then the spouse would be inheriting £850,000, this would be deducted as the spouse's exemption, and the net amount would be £100,000. This would not be liable to IHT because it is well below the threshold of £325,000.

If the amount after the spouse's exemption is well below the IHT threshold then just put in an aggregate estimate for her quarter share of the household goods - say £1,000 (assuming no valuables e.g. listed separately on the household insurance).