Estate value mostly in property

j_e_e

My mother recently passed away surviving my father by 10 years. She leaves some land, 3 houses, very little cash, and zero significant debts. My two siblings each live in one of the houses and were tenants only, making the houses effectively investment properties.  The last house was my mothers home and is, I understand from what she always told me, left to me in her will. Sadly my siblings and I are estranged, and one of them is the executor though I know the family solicitor has been recruited to assist / do the work.  I have asked for but have not seen the will. I am worried on two counts.

1. How much IHT will I have to pay - I do not have a lot of cash and I am past mortgage age. The family home should, I understand, get the benefit of a large chunk of IHT relief, which will reduce the amount. However, as my siblings are willed the other two houses and will want to pay as little IHT as possible I am confused about how this will all work. Is the family home tax allowance used on the value of the estate as a whole, or restricted to a specific property. 

2. The estate will not have enough cash to pay the IHT. I am worried that the siblings / solicitor will decide to sell a property to raise funds to pay the IHT - and that the property they sell will be the one that is intended to come to me in the will. How can I ensure this does not happen?

Thanks. 

xylophone

If your father left all his assets to your mother, and in view of the fact that the family home has been left to her offspring, it is quite possible that there will be two nil rate bands and two residence nil rate bands to set against the value of the estate when calculating IHT.

https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band

2. The estate will not have enough cash to pay the IHT. I am worried that the siblings / solicitor will decide to sell a property to raise funds to pay the IHT - and that the property they sell will be the one that is intended to come to me in the will. How can I ensure this does not happen?

It looks as though the exor will need to take out a bridging loan to pay the IHT or use his own cash- only when at least some of the IHT has been paid will probate be granted so that the assets of the estate can be sold.

You say that you have been left the family home - have your siblings been left the other assets?

Your sibling has engaged a solicitor to administer the estate - it seems unlikely therefore that any jiggery pokery is intended?

Keep_pedalling

You won’t pay any IHT, the executor will do that from the assets. If you mother has left each of you a property and IHT is due then it creates a problem if there are insufficient liquid assets to pay it. Some or all of the properties will need to be sold. 

If a solicitor has been involved then there is far less chance that the executor will do anything iffy when it comes to distributing the estate. At the moment you have no rights with regard to seeing the will, but it will become a public document once probate has been granted.

j_e_e

xylophone said:

If your father left all his assets to your mother, and in view of the fact that the family home has been left to her offspring, it is quite possible that there will be two nil rate bands and two residence nil rate bands to set against the value of the estate when calculating IHT.

https://www.gov.uk/guidance/inheritance-tax-residence-nil-rate-band

2. The estate will not have enough cash to pay the IHT. I am worried that the siblings / solicitor will decide to sell a property to raise funds to pay the IHT - and that the property they sell will be the one that is intended to come to me in the will. How can I ensure this does not happen?

It looks as though the exor will need to take out a bridging loan to pay the IHT or use his own cash- only when at least some of the IHT has been paid will probate be granted so that the assets of the estate can be sold.

You say that you have been left the family home - have your siblings been left the other assets?

Your sibling has engaged a solicitor to administer the estate - it seems unlikely therefore that any jiggery pokery is intended?

Thanks for the quick response. Yes the other siblings get a house each. Its not so much jiggery pokery that worries me as decisions that are taken by exor and solicitor without my input. If a property must be sold to make funds for IHT then there are 3 options and in each case someone loses significantly so there is motive to 'steer' the decision and it might not go in my favour.

j_e_e

Keep_pedalling said:

You won’t pay any IHT, the executor will do that from the assets. If you mother has left each of you a property and IHT is due then it creates a problem if there are insufficient liquid assets to pay it. Some or all of the properties will need to be sold. 

If a solicitor has been involved then there is far less chance that the executor will do anything iffy when it comes to distributing the estate. At the moment you have no rights with regard to seeing the will, but it will become a public document once probate has been granted.

Thanks for the speedy response. My understanding is that the estate must be valued and that information given to HMRC to determine the IHT due (from the estate), and that this must happen before probate is granted. This is all happening now and I am in the dark. I assume that the solicitor may have to arrange a loan to pay the IHT (from @Xylophone reply) which I also assume will be based on using the properties as security. I wonder which one they will pick.

xylophone

I wonder which one they will pick.

Is the value of the land insignificant?

Once part of the IHT has been paid, Probate can be granted.

Can the siblings not buy property from the estate with the help of a mortgage?

j_e_e

xylophone said:

I wonder which one they will pick.

Is the value of the land insignificant?

Once part of the IHT has been paid, Probate can be granted.

Can the siblings not buy property from the estate with the help of a mortgage?

The land is pasture, not high value and there is not a lot of it. No chance of planning permissions either. Lets say that the land is unlikely to yield a significant lump compared to the IHT.

Murphy_The_Cat

j_e_e said:

Keep_pedalling said:

You won’t pay any IHT, the executor will do that from the assets. If you mother has left each of you a property and IHT is due then it creates a problem if there are insufficient liquid assets to pay it. Some or all of the properties will need to be sold. 

If a solicitor has been involved then there is far less chance that the executor will do anything iffy when it comes to distributing the estate. At the moment you have no rights with regard to seeing the will, but it will become a public document once probate has been granted.

Thanks for the speedy response. My understanding is that the estate must be valued and that information given to HMRC to determine the IHT due (from the estate), and that this must happen before probate is granted. This is all happening now and I am in the dark. I assume that the solicitor may have to arrange a loan to pay the IHT (from @Xylophone reply) which I also assume will be based on using the properties as security. I wonder which one they will pick.

Not the solicitor (unless the solicitor is an executor as well) - it is upto the Executor to arrange for the IHT to be paid.

j_e_e

Let me move the goalposts on the question a little. Assuming an estate has properties but little cash or other assets, is it possible for the intended recipient beneficiaries of the properties to be able to negotiate with HMRC to make a payment plan proportional to their benefit under the will? How does that work if one beneficiary in the will can afford it and the others can't ? I see (after a little web searching) that there are companies specialising in probate bridging loans so I may be able to organise something in relation to the property I am left but I fear my estranged sibs will not be a reasonable financial bet for any lender and wonder how that will muddy the waters. I am expecting that HMRC would rather deal with the exor/solicitor/estate as a single point of contact rather than 3 individuals. Additionally I am wondering how any residual cash generated from sale of one/any of the properties is to be distributed - I guess that might be set out in the will (I cannot see!).

Keep_pedalling

Unless the will says otherwise, the first call on the estate for IHT is the residual estate, if that is not sufficient to pay it in full then the rest comes from the other bequests on a pro rats basis, the executor can’t simple sell one house and and pay the rest with out of the proceeds and not compensate the beneficiary for the share due to be deducted from the other bequests.

Leaving named properties in a will is usually a terrible idea, as it leads to these sort of complications and it can be a lot worse if one property had been sold to fund care fees.

xylophone

Assuming an estate has properties but little cash or other assets, is it possible for the intended recipient beneficiaries of the properties to be able to negotiate with HMRC to make a payment plan proportional to their benefit under the will?

There is a named exor who is willing and able to apply for Probate - it appears that he  has engaged a solicitor to assist.

Under these circumstances, it will be the exor/his solicitor who will be  dealing with HMRC.

It may be possible to set up an instalment plan. 

https://www.gov.uk/paying-inheritance-tax/yearly-instalments