Estate is well below IHT threshold but I'm being steered toward IHT400 insted of IHT205

pea60s52w

Hi,

I'd appreciate a bit of a sanity check here and sorry for the War and Peace.

A relative with mobility issues has passed away leaving a will and a near-as-dammit "cash only" estate with some accessible furniture (motorised bed and chair), computer, and a pet. As the late relative was tech-savvy they'd gone paperless donkeys years ago, so there is very little in the way of accessible papertrail. Thankfully, some printouts and posted letters were kept in a filing cabinet but there is bound to be stuff that I will have zero knowledge of and no ability to discover until I have probate.

Everything I've identified (as the executor) points to it being an estate worth less than £300k, i.e. less than the NRB (and I believe the RNRB applies). Most of its worth came from the probate of the predeceased spouse. So you'd think I'd be able to IHT205 this one... But there are three complications.

1. the deceased sold the family home only six months before passing away, and had moved in with a lineal descendant (who's also a beneficiary in the will) before being taken ill and passing away. So there's no property to sell, but there is still a legitimate RNRB carry-over. Brilliantly, the IHT form offers no clear explanation for that.

2. A sum of money in the £15k ballpark has been given by the deceased, out of the house sale proceeds, to the lineal descendent they moved in with. The vast majority of that money was used to pay invoices for specific improvements to the property e.g. to construct an accessible downstairs wet room and replace an ancient leaky gas boiler. Money was paid to the relative, and the relative then paid the invoices, but the deceased had a say in what the money was spent on. I don't know if any of those cash amounts are exempt from declaration, or must be declared as gifts, or must be declared as GROB (gift with reservation of benefit). The third option makes sense as the deceased relative was benefiting from investments in the property that were only being made because they'd moved in - but if I choose that in IHT205, it boots me out and tells me I need to do IHT400.

3. Another £35k went to another lineal descendent as a gifted deposit (and there's a solicitor's letter to prove it). 

Even if you add the £40k to everything else I've found without having probate, the estate is STILL worth less than £325k and the more I look at the IHT400 the more it looks like utter, utter, UTTER overkill. Am I missing something? Perhaps I don't need IHT400 with half a dozen schedules to cover £naff-all worth of second hand furniture etc.

Gripe: Why can't the IHT forms simply ask the executor to provide one UPRN for a property that RNRB applies to instead of creating a stupid industry around it?!

naedanger

If when completing IHT205 you are directed to fill in IHT400 then you are not missing anything. It is the case that IHT400 can be required for estates that aren't liable for IHT and may seem simple.

I recently had to fill in IHT400 and many schedules for what, to me, seemed a common situation that could have easily been covered by IHT205. A slight consolation was that the schedules were very easy - for example I believe I only had to enter one number on the schedule covering contents, and I don't think the forms receive much scrutiny in cases where the estate is nowhere near the threshold for paying IHT. 

xylophone

Regard the £50,000 (money to the two relations) as gifts.
Is it possible to use the £3000 exemption in the years when the gifts were made?
The relative has his NRB and RNRB - do you need to bring in any transferable allowance at all?

pea60s52w

Thanks for getting back so quick.

I think the contents of the property weren't worth much in current money - nothing was catalogued in the will and it's effectively just a few items that could be considered valuable. No artwork, no antiques, etc.

Clothes were of the "only £10 new, and bought 5 years ago" kind. The charity furniture collectors aren't interested in the mobility stuff like the electric bed and recliner/riser chair. Similar electric beds have been up on local selling groups for months, "any offers", and still no takers. What do you put down the value for, if a nearly new £600 bed can't achieve £50 on Schpock?

The will has 2 named beneficiaries, and the gifts went to the beneficiaries. Their gifts were received in instalments over the last nine months (the house sale completed in August, that's when sibling 1 was moving out of the sold place and buying their own place and sibling 2 was organising renovations and improvements before the parent moved in).

It's incredibly sad that around six months later, the parent got ill, went into hospital, and never came home.

Keep_pedalling

If the estate including gifts is below £325k then no transferable allowances or RNRB will be required, so what is leading you to think you need to fill in IHT 400?

getmore4less

Do you even need probate if it is all cash.
Has it been asked for?
I you don't need RNRB or transferable then what is directing you to IHT400.

Even when you go IHT400 you only use those that apply so not a lot more work than 205.

pea60s52w

It asked if there were any assets that the parent may have enjoyed a benefit from after giving them away, and it asks this question irrespective of the value of the estate. I instinctively answered "yes" because the downstairs wet room adds value to the property, AND the parent enjoyed the benefit from that gift more than the recipient of the gift did. Also, without that gift the parent would've needed to find a different ground floor residence - bought or rented, and probably with warden control. So, massive cost savings came with making the gift.

When I said yes to that question for that reason, the form shut me out with a message telling me in effect that I can't fill the 205 in purely because I answered yes to that question.If the IHT officials were to contact me with a statement to the effect that it is CORRECT to change the answer to "no" (e.g. because these cash transfers do not amount to a GROB), I'd be comfortable changing the answer.

Again, a lot of the beef I have with this process is the absurdity of being forced to file the IHT claim before even being allowed to apply for probate to confirm the information I give in the IHT is correct. It's the wrong way round, surely, in the GDPR and paperless banking modern world.

pea60s52w

"If the estate including gifts is below £325k" - it looks that way, but only because I don't have probate. Because all the banking etc. was done electronically, I'd have to break a biometric lock on the deceased's iPad to get into the apps to find out what's what.

For all I know they were playing online poker and have a half million pound stash of winnings. Or, maybe they supplemented the 50 quid's worth of premium bonds that I do know about (thanks to a 25 year old letter) with 5000 more that were bought through the app after going paperless.

But that is academic. The way the 205 form works, even if the deceased's estate contained nothing more than £50k in bank accounts it'd only take one single GROB to trigger the "sorry, you cannot complete this form, now go away and beat yourself to death with the IHT400" message.

Keep_pedalling

tstaddon said:

It asked if there were any assets that the parent may have enjoyed a benefit from after giving them away, and it asks this question irrespective of the value of the estate. I instinctively answered "yes" because the downstairs wet room adds value to the property, AND the parent enjoyed the benefit from that gift more than the recipient of the gift did. Also, without that gift the parent would've needed to find a different ground floor residence - bought or rented, and probably with warden control. So, massive cost savings came with making the gift.

When I said yes to that question for that reason, the form shut me out with a message telling me in effect that I can't fill the 205 in purely because I answered yes to that question.If the IHT officials were to contact me with a statement to the effect that it is CORRECT to change the answer to "no" (e.g. because these cash transfers do not amount to a GROB), I'd be comfortable changing the answer.

Again, a lot of the beef I have with this process is the absurdity of being forced to file the IHT claim before even being allowed to apply for probate to confirm the information I give in the IHT is correct. It's the wrong way round, surely, in the GDPR and paperless banking modern world.

I would not class paying for adaptations for disabilities in this situation as a gift, let alone a gift with reservation. It actually makes no difference to IHT whether you class this as a gift or not, for simplicity I would just class it as a gift. 

naedanger

If you were to include that amount as an outright gift rather than a gift with reservation then would you be able to complete the IHT205? If so, you could consider doing that, although not technically accurate, I don't see that it is doing any harm (since being a recent gift the amount will be counted as part of the deceased's estate), provided you are sure no IHT is actually payable. 

Another point, when I had to do the full IHT400 it was clear the estate was miles below the IHT threshold because I was including allowances not covered by IHT205. I thought, rightly or wrongly, that as a result the estate might actually have got less HMRC scrutiny and questioning than say an estate valued at £324k using IHT205. And although IHT400 is spread over many sheets of paper it is probably not going to be that difficult to complete. 

I think the advantage to HMRC of requiring a completed HMRC return before getting probate is that it becomes harder for people to "forget" to do the IHT return. 

naedanger

tstaddon said:

"If the estate including gifts is below £325k" - it looks that way, but only because I don't have probate. Because all the banking etc. was done electronically, I'd have to break a biometric lock on the deceased's iPad to get into the apps to find out what's what.

Is getting probate going to help you find assets that you cannot currently find? I thought, possibly wrongly, that even Apple couldn't access a secured iPad.