Deceased P/Exchanged car for one in my name before death - how to add to IHT400

Ali71

Hi all,

In a bit of a quandary here. Am filling in the IHT400  and associated schedules, but just thought, shortly before my father passed away, he wanted to get rid of the almost new car he had bought himself end of last year, as he was too ill too reliably drive any more, and decided a good option was offering it as a part exchange plus a little top up of cash for a bigger newer car that would be in my name, then I could use it for myself and use it to drive him around as and when he wanted. So his car went to the dealers, plus a little bit of cash, and I picked up a newer car in my name. 

So how do I add this to the IHT400 please? Gift? It sounds a  bit odd, but I don't want them to have any excuse to think "hmmm, what's going on here?" Luckily for me, a couple of houses in the same street recently sold stc so I can print the Rightmove adverts out for them and attach to the forms so they can see I have not underestimated the house value (or half of it, I already own half), but not sure what to do about the car thing.......any help appreciated.

Many thanks .

naedanger

Was a contract signed by your father prior to his death to buy the new car? If so, whose name was down as the purchaser/owner of the new car?

Keep_pedalling

There is a difference between the registered keeper and the actual owner of the car, so this was either a gift or is still an asset of his estate. You can almost certainly get away with either, and I would go with the latter as the actual value of the car is almost certainly lower than the actual price paid which would be the value of the gift.

Ali71

Hi,

Looking back through the emails received from the car dealership, (it was all done by email, the Covid thing), my Dad arranged it with them, all the car paperwork was signed by me as the customer, and the car was in my name, it's just that the car they took in part exchange was my Dad's, obviously they had several conversations with him over the phone but he never had to go in to the dealership or anything I signed all the paperwork when I took his car in and picked up the new one. So actually looking at it the customer name on everything is mine. 

Many thanks 

naedanger

So your father gifted his near new car plus the balance to you, total value = price paid for new car. (Or at least that is how I would show things on the IHT forms.)

Ali71

I see. Thank you for that. Just reading through the notes on the gifting schedule so if the total is still under the taxable limit for IHT, does that mean this wont have any inheritance tax to pay on it? And it looks like from the little note that if inheritance tax is due on any of the gifts, then the person who received the gift is liable to pay the tax due on them, this is separate from any inheritance tax due on the estate.

What does that mean please? Sounds like IHT x 2 (!!) 

Many thanks 

naedanger

Ali71 said:

I see. Thank you for that. Just reading through the notes on the gifting schedule so if the total is still under the taxable limit for IHT, does that mean this wont have any inheritance tax to pay on it? And it looks like from the little note that if inheritance tax is due on any of the gifts, then the person who received the gift is liable to pay the tax due on them, this is separate from any inheritance tax due on the estate.

What does that mean please? Sounds like IHT x 2 (!!) 

Many thanks 

If the value of the estate plus the gift(s) is still under the IHT threshold then no IHT is payable nor is any tax payable by the gift's recipient.

[If any tax had been due it would be the estate that would have to bear it. The "tax" on gifts is misunderstood. It is really just a means of stopping large estates from avoiding IHT by gifting money shortly before death. All that happens is gifts within 7 years of death are treated as though they were still part of the estate. So the estate is just paying the same amount of tax as it would have done had no gifts been made.]

Ali71

Excellent, thank you for that. Why are the notes on IHT 400 so confusing? i had to ring the IHT helpline a couple of times to check something, the guy on the other end both times spent more time looking through the notes and "umming" and "aahing" than I did. All rather worrying.....

Many thanks.

Ali71

Keep_pedalling said:

There is a difference between the registered keeper and the actual owner of the car, so this was either a gift or is still an asset of his estate. You can almost certainly get away with either, and I would go with the latter as the actual value of the car is almost certainly lower than the actual price paid which would be the value of the gift.

Hi,

Of course, how interesting, see what you mean about values etc. I suppose I would list it in this case then under household and personal goods?

Many thanks

naedanger

Ali71 said:

Excellent, thank you for that. Why are the notes on IHT 400 so confusing? i had to ring the IHT helpline a couple of times to check something, the guy on the other end both times spent more time looking through the notes and "umming" and "aahing" than I did. All rather worrying.....

Many thanks.

The forms are written to cover all sorts of estates including those with huge amounts of assets and tax advisers aggressively seeking to minimise the potential tax, which sort of explains some of the complexity e.g. a lot of questions relating to pensions are, I think, designed to catch those undertaking complicated tax minimisation strategies, whereas they just confuse the vast majority of people to whom they don't apply.

(I was quite amused when asked to list any areoplanes the deceased owned, or words to that effect.)

getmore4less

How close to the total nil rate band are you?
(that's including residential and any transferable)


Are there beneficiaries that might want a share.


One interpretation is that it was an outright  gift.


Another is that you held the car on trust for the benefit of your father so it does become part of the estate.


With the later you get to use the market value rather than the gift value.

just goes down as car.