Inheritance when one parent dies

[Deleted User]

Hello,

My mother unfortunately passed away during the pandemic (late 2020) and we are still dealing with the finances and such. Everything went to my dad because he's the next of kin, and there was no will. Is it possible for him to give his two children anything on her behalf as an inheritance? I cannot find anything online about this scenario, which seems odd.

Thankyou!

Sea_Shell

Yes.  There are two basic ways.

If there's a chance that your Dad's estate may now be into inheritance tax territory (£1m Inc house?), he could do a Deed of Variation to pass an amount to you, which makes it as if the money had come directly from Mum.

If no chance of IHT, he could just make you a gift as the 7 year rule wouldn't apply.


As long as neither option leaves him short, it's completely doable.

Just bear in mind either future/current benefits or deprivation of assets.

Keep_pedalling

Dyeing intestate does not mean everything goes to a spouse. If she had sole assets exceeding £270k then your father would inherit the first £270k and 50% of the remainder. The remainder is inherited by her children.

As you father’s estate will be able to use any of your mother’s NRB and RNRB, there would be no point in making a deed of variation, you father could simply gift some of his inheritance to his children. 

[Deleted User]

Wow, I am glad I posted here - I was completely unaware that my dad could use my mum's unused NRB and RNRB. I was very confused when Sea_Shell mentioned the £1m figure, because we have nowhere near close to that amount - we were worried we'd go over 500k (inc house) and would have to pay on that.

So really, given that there's two parents and my mum used nothing from either her NRB or RNRB, the effective inheritance tax threshold is £1m? This fixes all of our problems if so. Is there any time limit after my mum's death before we lose her NRB/RNRB?

Keep_pedalling

[Deleted User] said:

Wow, I am glad I posted here - I was completely unaware that my dad could use my mum's unused NRB and RNRB. I was very confused when Sea_Shell mentioned the £1m figure, because we have nowhere near close to that amount - we were worried we'd go over 500k (inc house) and would have to pay on that.

So really, given that there's two parents and my mum used nothing from either her NRB or RNRB, the effective inheritance tax threshold is £1m? This fixes all of our problems if so. Is there any time limit after my mum's death before we lose her NRB/RNRB?

No time limit, unless the government change the rules.

[Deleted User]

Brilliant, that's great news and basically solves all of my problems. Thanks again to both of you

getmore4less

Sea_Shell said:

Yes.  There are two basic ways.

If there's a chance that your Dad's estate may now be into inheritance tax territory (£1m Inc house?), he could do a Deed of Variation to pass an amount to you, which makes it as if the money had come directly from Mum.

If no chance of IHT, he could just make you a gift as the 7 year rule wouldn't apply.


As long as neither option leaves him short, it's completely doable.

Just bear in mind either future/current benefits or deprivation of assets.

The issue with that is you lose the equivalent amount in transferable nil rate band, by just gifting the 7y rule can increase the effective available NRB if he lives for the 7 years  otherwise IHT neutral.