Inheritance tax

kawasakigirl

My husbands father left him as a trustee on his house on the condition his mother could live in it till she died. His mother has now died and the house needs to be sold. Will my husband have to pay inheritance tax? 

Flugelhorn

Only the estate pays inheritance tax and that is on the value of the whole estate, there are some significant allowances which may mean not much tax to paid if any - what sort of figures are you looking at?

kawasakigirl

The property could sell for 900,000

Keep_pedalling

kawasakigirl said:

The property could sell for 900,000

If as I suspect the trust was a immediate post-death trust which, assuming he died after 22 March 2006, means the whole house forms part of her estate. Her estate will be able to claim her nil rate band (NRB) and residential nil rate band (RNRB) giving the estate £500k IHT free. In addition to this as a widow her estate can claim any unused part of of her husband’s NRB (none will have been used with the trust) and his transferable RNRB. 

So if apart from the trust her husband left her all of his estate, her estate will have £1M of exemption. 

What was the exact wording on his will with regards the trust?

kawasakigirl

It wasn't left to his wife at all. It was left to his 2 sons, on the condition their mother could live there until she died. So it is not part of her estate at all. 

kawasakigirl

Also he died about 40 years ago. 

Keep_pedalling

The house was left in trust rather then left directly to his sons, so it is important to understate what sort of thrust the will set up. As his death was 40 years ago it his estate that would have paid IHT on the value of his estate at the time, so regardless of the type of trust the house does not form part of her estate.

Taxation of trusts is complex which is why it is important to establish the type of trust his will set up (as a trustee your husband really should know this). Although IHT may not be an issue, CGT could very well be. If in doubt the trustees should take professional advice.

kawasakigirl

Thanks all. I will get a solicitor on to it! 

uknick

kawasakigirl said:

Thanks all. I will get a solicitor on to it! 

You will need a STEP solicitor who can do the tax as well as trust issues.