Gross Estate Valuation just over NRB Threshold

Bonavino

Hi, I'm looking for confirmation (or otherwise) that I am on the right track with a probate application I am handling as FIL’s (joint) executor.  I have handled a couple of simple, low value, applications previously, so I understand the basics, but this application is a little more challenging.  I have included a high-level summary of the position below. It is slightly simplified as there is a small provision for grandkids included in the will.

-   FIL & MIL were separated, but still legally married and all assets are owned separately.

-   Estate to be split equally between MIL and their 2 (adult) offspring.

-   A couple of recent backdated awards from DWP has lifted the Gross Estate value slightly above the IHT threshold c£335k (House £230k, Gifts (< 7 years) £10k, Assets £95k). Being so close to the threshold, I’ve looked at Estate valuations / qualifying gifts closely.

-   Net Estate Value is c£330k (no mortgage/debts with settlements mostly confirmed).

-   Full Relief is due on MIL's entitlement (£110k), so no IHT is due on Estate, however I believe I need to submit form IHT400 as Gross Estate value is above IHT Threshold (and possibly because property is included in the estate and passing partly to offspring).

In submitting IHT400, I am assuming:

-   As MIL's settlement will be £110k, the Qualifying Estate value is (£330k-£110k) = £220k and the future Unused NRB for MIL will be (£325k-£220k)/£325k = 32.3%.

-   It seems sensible to forego claiming RNRB allowance now, so it can be used in full for MIL’s Estate.

Is this correct? Any pointers or corrections to my misunderstanding would be appreciated.

getmore4less

what value property does the MIL have.

What is happening to the FIL property 

Bonavino

Thanks. 

MIL lives in a council property - she will look at the possibility of using inheritance to purchase it. 
FIL property will be sold.

getmore4less

How will MIL utilise £350k of residential nil rate band if all made transferable?

Bonavino

I'm not sure if she will utilise the full £350k RNRB,  My thinking is merely that she lives in south-east, is entitled to a decent discount (having lived in the property her adult life) and if she lives long enough, it might be a possibility.  The Council valued the property a few years ago at £240k, but it was just out her financial reach. With this inheritance, she thinks it will now be possible.  

Happy to consider other options.   

buddy9

Is this not an exempt estate which requires an IHT 205, rather than IHT 400? (pre 2022)

Exempt estates These are estates where there can be no liability to Inheritance Tax because the gross value of the estate does not exceed £1 million and there is no tax to pay because one or both of the following exemptions apply: • Spouse or Civil Partner Exemption • Charity Exemption

Bonavino

Thanks, buddy9.  Good spot - I've had a quick look and I think you could be correct. When I looked at it initially, some questions pointed me to the IHT400 route, given my understanding.  I'll have a proper look this evening. 

 If it proves correct, it will save a lot of time. Thank to you and getmore4less for taking the time to respond.

RAS

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