Sense check on probate approach please :)

SJB11

Hi...would appreciate a sense check of the high level approach I’m taking with my Dad's estate, who passed a few weeks ago.  

Mum passed 10 years ago and her estate used around 95% of her NRB. The significant part of the estate declared was 50% of the house value she lived in with Dad (Joint Tenant). This was changed from tenants in common prior to Mum’s passing. Looking at the rules now, these seem to be saying that this could have been passed without IHT as it went to my Dad....? There was no Residency NRB at the time. The remaining estate came to me and I'm sole beneficiary for Dad's estate.

I’m planning on doing Dad’s probate myself.  

I’m planning on using the following against Dad’s estate 

• Dad’s full Nil Rate Band 

• Dad’s full Residency NRB 

• Transfer retrospectively Mum’s Residency NRB @ 100%

• Transfer the unused part of Mum’s NRB 

I have the identified the following forming Dad’s estate 

• House 

• Savings 

• Shares 

• Gifts 

• Debts/expenses 

House 

I’ve had 3 estate agent valuations, currently using the average value...but...there’s a spread of £70k between the valuations, 2 close, 1 significantly higher. Whilst under the apparently available RNRB, am tempted to get a surveyed valuation given the spread, and also we’re planning to move up to Dad’s and sell our current property, so a solid valuation may prove useful in the future. 

The house will be easily below the RNRB from Mum and Dad’s combined RNRB when I use 50% of the current value.  

Gifts 

Dad was very generous over the last few years, primarily to my son and I. I believe I have identified the gifts he has made by: 

• Going through his check books & statements 

• Going through my son’s savings accounts 

• Going through my own accounts 

I’ve got a sheet of these and have removed the £3k allowance for each tax year. I’m including a value for cash gifts (Christmas and Birthday) where the allowance has been used for me or my son (depending on who I used the allowance on in each tax year). 

After expenses and debts, the remaining estate comes out at: 

• House – around £150k below the combined RNRB (based on 50% of the value)

• Savings, shares, gifts (minus debts and costs) – around £10k below dad's and remaining transferred NRB 

Does the above approach make sense - what have I forgotten/misunderstood at this high level?  

Thanks for reading 

Steve 

naedanger

All assets that your mother passed to your father (assuming they were married) should have been exempt from IHT using the spouse's exemption. (Only assets left to others would use up her nil rate band.)

You say "The house will be easily below the RNRB from Mum and Dad’s combined RNRB when I use 50% of the current value. " Why are you using 50% of the current value? Do you mean your father only owned 50% of the property when he died? 

getmore4less

Were they married at the time of mothers passing?

If dad owns 100%(which he will if joint)  that's what you use.

Who administered mums estate?

SJB11

Hi  - thanks for replies...
The 50% was used as 50% of the property had already been declared as part of Mums estate and yes they were married. However this might be highlighting an issue with Mums probate (which I did...holding hand up there). I'll need to do more digging there.

I might just be misunderstanding the form for Mum...The house (50%) was declared in Section 9 (9.2 - Deceased share of joint assets passing to the joint owner) of IHT205. This makes sense for the Joint Tennant part and suggests the share passed to Dad. All well and good, I'd then use, I assume, the fuller remaining NRB from Mum and 100% of the house for Dad's estate.
Confusion then sets in as the gross value for IHT then uses this value and this passes to the Net value...unless I should have used Mum's share in box J (which I didn't) and deducted to give the net......?

naedanger

After your father inherited his wife's share of the house he owned 100% of the property so you need to include the total value on the forms for his estate. You should not be entering 50% for the house anywhere on his forms.

The allowances you can use in respect of your father's estate:
His nil rate band = £325k
His residential nil rate band = £175k
Transferred nil rate band = £325k less any assets (including gifts) your late mother left to anyone other than her husband
Transferred residential nil rate band =  £175k or if lower (value of house less £175k)

If the transferred nil rate band is different from that on your late mother's forms then I suggest you speak to HMRC to see whether there is any process or forms you need to complete to get the figure corrected. (Or others posters may know more.)

In my view, you should get the house professionally valued given the variation in valuations and the size of the estate.

I don't really follow your last sentence. But on your late mother's form in box J you should have entered the total of the assets passing to your father. (That is the spouse's exemption.) [On your late father's from, box J should be zero.]

[It would easier double checking everything if you gave actual figures.]

[By the way I don't think you will be able to use form IHT205 for your late father's estate.]

getmore4less

You don't get to ignore assets you inherited from someone else just because they were on that person's IHT return.

You need to back and rework your mother's return properly to establish any transferable nil rate band available.

What was their rationale for changing from TIC to Joint?

SJB11

Thanks for further replies. It does seem I made an error on Mums forms by not reducing the Gross IHT by the 50% of the house which passed to Dad in box "J". I'll give the IHT helpline a call and see how they want me to proceed.
It makes much more sense this way, and a quick re-calculation looks to put the estate further under the IHT threshold, assuming I can get the approach back on track.
As to why Mum and Dad changed from tenants in common to join tenants, looking at the paperwork trail, Dad believed that they had bought as joint tenants, so was getting getting the deeds agreeing with this. They wished the sole assets to pass to me.
Agreed I won't be able to use IHT205 for Dad.
Will post back after talking to IHT.

getmore4less

If there is no change to the IHT due they will probably say just get this one right and add a note to the transferable nil rate band claim with explanation why it does match the previous deceased. return

SJB11

getmore4less said:

If there is no change to the IHT due they will probably say just get this one right and add a note to the transferable nil rate band claim with explanation why it does match the previous deceased. return

Fingers crossed....

SJB11

@getmore4less was spot on. Spoke to IHT Helpline, and since there's no impact to Mums IHT, they are happy for me to use the corrected amounts and add a note to explain.
As a result, the claim will be along the lines of...
Property - use 100% value for Dad's claim. After Dad's and Mums transferred RNRB, there's around £55k not covered by the combined RNRB
Assets - including gifts, savings, shares and the residual property value. Using Dad's NRB, plus transferring Mums unused NRB am now around £115k below IHT threshold.
Will dot the i's and cross the t's on the figures, get a full property valuation and then start filling in forms.