Inheritance tax in this scenario? - Mum will be selling family home for £350k after dad died.

[Deleted User]

And she will be splitting the money from that between her, me, and my 2 siblings. 

How will inheritance tax work in this scenario?

Will I have to pay tax on my £85k cut?

theartfullodger

Who's name was property in before his lamented death?  Were they tenants in common? 

Is price fair market price?  HMRC have powers to tax at market value rather than price on sale contract .

What else in his assets for his total estate?  If nothing else almost no IHT to pay I think.

user1977

More info needed - such as the total value of the estate. IHT is paid by the executors, not the beneficiaries. More one for the probate board than this one.

TBagpuss

What does your dad's will say? 
If she is his sole beneficiary then as I understand it, there will be no inheritance tax - she inherits, then if she choses to make gifts to you and your siblings, that's between you and her.

If you and your siblings were named in the will, or if there was no will and the intestacy rules apply, then it's a bit more complicated .

It is however the estate which pays the inheritance tax, so what would happen is that you and your siblings would receive a bit less as the estate would pay the tax first, before passing anything on to your or your siblings. 

The IHT threshold is £325,000 so the estate would only pay tax on anything over that threshold.

So, if you are a direct beneficiary the relevant factors are whether the house is the whole of the estate or whether there are also other assets to be taken into account, whether the house and other assets were left to you directly or to you mum who is now making gifts to you, and whether the house was originally in joint names and how your parents owned it.

Thepeoplespal

Get proper advice from a probate solicitor and remember that if each and every beneficiary agree you can alter a will via a deed of variation to suit yourselves.

Generally transfers between a husband and wife are free of inheritance tax until the 2nd partner dies, so half of 350k - £175k  would not be due any IHT calculation until your mum dies anyway.   If a house is gifted as part of a will the excess over the £325k would be part of the £175k additional threshold for those inheriting a house, so no IHT should be payable anyway, if that is all you father had.   The 150k could then be used if your mum chooses to leave her house to you on top of her £325k and £175k thresholds, so potentially £650k free of IHT.

Don't mess about, a probate solicitor will make sure you don't make a horlicks of it.

Also forget about PET, (potentially exempt transfers), the graduated payment of IHT will not happen unless your mum is giving away £millions, ok more than £325k in cash, as all cash transfers get used up in date order for the original £325k threshold (no one tells you this, or explains it), so it makes it to 7 years when it is outside IHT or it uses up the thresholds first.  It is not a mix and match, the cash uses up the 0% rate threshold first.
.
You will need to be careful that any gifts out of capital to you from mum, as if mum needs to go into a care home, these can potentially be seen as depriving her of her capital.

RAS

It's not just if mum ever needs to go into a care home that deprivation of assets becomes an issue.

If she needs to claim any means-tested benefit or any care support package, they may simply be refused because she has given away her inheritance. It would then be for you and your siblings to provide the financial support.

Mumm needs to take independent advice from someone like Age UK before she makes such important decisions.

[Deleted User]

Thank you all for taking the time to respond. 

I'm afraid I don't even understand some of the questions I'm being asked, and I don't know the answers to really any of them. 

I think I'm going to need more help on figuruing all of this out. I feel very thrown in at the deep end. Where can I go to get help on this?

getmore4less

Who is dealing with dads estate they need to get that right first.

One key bit of information  will be the total estate when both are combined.

trailingspouse

Where will Mum live after she's sold the house and divided the proceeds? £85k won't get her very far? Why does she feel she wants to divide it between you all? Surely she would be better to use the money to fund a house that is right for her, and then you and your siblings get whatever is left after she's 'finished with it'?

Thepeoplespal

I'd check that you can't do a deed of variation to get what you want - all beneficiaries have to agree to the change though - again a probate solicitor will be able to help you with this, don't skimp on taking the proper advice as it can end up costing a lot more later. 

youth_leader

I'm assuming your Mum is going to downsize and buy again with her share?  

I understood you could gift your children any amount and it wouldn't form part of your 'estate' if you lived for seven years following the giving.