Question re. IHT andgifts, with one parent alive

Downandoutmoney

My father recently died unexpectedly. We are going through the confirmation process for the estate with his solicitor at the moment, the value of which we believe is going to be under £350,000 (my mother is still alive). We have had an email this evening from our father's solicitor which has panicked our mother, and unfortunately their office is now closed for the weekend, so I was hoping someone might be able to answer the following question, just so we can explain to her what will happen in relation to a gift.

Just over three years ago, my parents gave my brother and I £50,000 each. Will this be taxed at the sliding scale of 32% as part of the estate, or will it not be included/ taxed, as the gift came from both parents, one of whom is still alive? I should add that we are in Scotland.

Thank you very much in advance.

Keep_pedalling

Were your parents married?

Downandoutmoney

Good evening. Yes they were.

Keep_pedalling

Assuming your father left the bulk of his estate to your mother there will be no IHT to pay. Your father’s share of those gifts will reduce the amount of transferable NRB that can be passed to your mothers estate, but that will only be an issue if her estate is well over double his.

buddy9

The solicitor may be looking at the need to collate gifts in calculating legal rights entitlement. 

If there was a will, who are the beneficiaries?

Downandoutmoney

Thank you for the answers. There is a will, the majority of which goes to my mother. 

buddy9

Whatever transfers to a married spouse is free of IHT.

The solicitor will consider legal rights (legitim) entitlement. This is where children of the deceased can claim a share of the moveable estate (regardless of what the will says) but in doing so, forego any legacy in the will.

 On the basis of the information you give, it looks like there may generally be three possible scenarios.

1. You and your brother renounce your legal rights (legitim) entitlement. Some of the estate nil rate band (NRB) is used up by the £50k gift (assuming that half of the gift was from your father), and by the other legacies. But no IHT liability.

2. You and/or your brother claim legitim. The legitim, the gift (£50k if both claim legitim) and any remaining legacy use up some NRB, but no IHT liability.

3. You and/or your brother claim legitim, the gift is treated as an advance of legitim and used to revise the legitim entitlement by collation. The legitim and any remaining legacy use up some NRB, but no IHT liability.

Keep_pedalling has explained how the use of NRB affects what can be claimed in the futre.

Downandoutmoney

Thank you very much for that, much appreciated.