Query on IHT on home, second house and money when no will - All to husband if two children ??

BigBlueSky

Apologies in advance for the long-winded post, but I wanted to try and cover everything that may be needed.

A family members mother has recently passed away and we are in the process of helping them to apply for Letters of Administration as she didn't write a will.

She was married to her husband and has two children (son and daughter) and three grandchildren.

I'm trying to get my head around the different allowances - £325,000 IHT nil-rate band as well as the £175,000 residence nil-rate amongst other things.

Her husband, I had assumed would receive everything - in which case there would be no IHT to pay, but looking at intestacy rules it sounds as though this may not be the case.

Everything is in either joint names with her husband or in her sole name, apart from a second house which is jointly owned by herself, her husband and her son. - I know her share of this would automatically go to the surviving two owners - but I assume this is still counted for IHT purposes.

Bank Accounts
Sole Accounts (Cash ISA, S&S ISA, Savings, Premium Bonds) - £199,850
Joint Account (Current a/c with husband) - £150
Business Account (Joint with husband and son - Balance £5,250 - 45% her share of business) - £2,362.50

Property
Main Residence (Joint with husband (Joint tenants) - Estimated Value around £180,000) - £90,000 (Her half share)
Second Property (Joint with husband and son (Joint tenants) - Estimated Value around £200,000) - £66,666 (Her equal third share)

This brings the total value to approx £359,000.

Can everything go to the husband and would therefore be tax free, or does a proportion have to go to the children (even if they choose they don't want it) ? - I've read something about £270,000 going to the husband and the remainder going 50/50 to the husband and children.  If this is the case what about the second property which the daughter has nothing to do with ??

Any guidance would be appreciated.  We've been reading through many different articles online from GOV.UK to other websites and struggling to get our heads around it properly.

Keep_pedalling

Anything going to her husband is exempt so would not touch her NRB.

Her marital home automatically passes to her husband as it is owned as joint tenants. This does not form part of her inheritable estate. 

The second home will automatically pass to the 2 survivors, with the share going to her son eating up aprox £33k of her NRB. 

Her sole accounts will pass to her husband as she has under £270k of inheritable assets.

As for the business account that will depend on the type of business. If it’s a limited company then the money belongs to the business and it would be her shares that would be of interest not the money in the business account.

BigBlueSky

Thank you so much for the reply, I really appreciate it.  Your reply makes sense and helps us to get our heads around it all.

So in this case the only thing that would eat into her nil-rate band would be the £33k share going to her son? - The remainder of the £325,000 nil-rate band and the additional £175,000 residence nil-rate band would be untouched ?

I thought I had read somewhere that the £270,000 amount capped for her husband included the properties?

So in terms of the rules of intestacy it wouldn't reach the £270,000 limit with the remainder going 50/50 to he husband and two children ?

With regards to the business account it is a 'Partnership' account for herself, husband and son.  Not a limited company.

Keep_pedalling

BigBlueSky said:

Thank you so much for the reply, I really appreciate it.  Your reply makes sense and helps us to get our heads around it all.

So in this case the only thing that would eat into her nil-rate band would be the £33k share going to her son? - The remainder of the £325,000 nil-rate band and the additional £175,000 residence nil-rate band would be untouched ?

I thought I had read somewhere that the £270,000 amount capped for her husband included the properties?

So in terms of the rules of intestacy it wouldn't reach the £270,000 limit with the remainder going 50/50 to he husband and two children ?

With regards to the business account it is a 'Partnership' account for herself, husband and son.  Not a limited company.

Not sure how partnerships are treated. Properties held as joint tenants only form part of the estate for IHT purposes they are not inheritable as they pass automatically to the surviving owners so don’t count towards the £270k.

If the husband and son are in agreement to split the saving differently that can be either be done through he husband gifting some of his inheritance or through a deed of variation. The former avoids any more NRB being used up, the latter avoids that part of the inheritance being added to the husband’s estate.

BigBlueSky

Thanks again for the reply.

Just to clarify and make sure I understand.

So the properties are included as part of the estate on the IHT paperwork, but don't count towards either the £270,000 amount ?

If that is the case and the properties don't count towards the £270,000 amount, then the rest of the assets wouldn't be above that amount so the 50/50 split with husband, son and daughter wouldn't come into it so no need to agree anything ?

Thanks again

Marcon

BigBlueSky said:

Can everything go to the husband and would therefore be tax free, or does a proportion have to go to the children (even if they choose they don't want it) ? - I've read something about £270,000 going to the husband and the remainder going 50/50 to the husband and children.  If this is the case what about the second property which the daughter has nothing to do with ??

You did - you could have read it here: https://www.gov.uk/inherits-someone-dies-without-will

Sounds as if a bit of professional advice might be no bad idea, given there are a few wrinkles - nothing which can't be resolved fairly easily, but getting it right first time will be a lot easier than letting things drag on (and possibly creating bad feeling in the family).

BigBlueSky

Thanks for all the replies so far, really appreciate it.

It can be daunting getting my head around it all.  Prefer to understand it myself really so I know what we are doing and not relying on others.