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Newbie- IHT/ Probate/ Trust queries

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Apologies in advance for the likely stupid questions I'm going to be asking!  Everytime I sit down and look at the information around IHT/ Trusts etc I think I've figured it out, then get diverted with work, life etc, and then I just confuse myself again. Does make me laugh, that at one of the hardest times of your life, you have to deal with an inordinant amount of paperwork, and in some cases, some really quite rude people!  I can see lots of useful help and advice from posters, so thank you in advance.

My Dad died in November last year (mum still alive), and we had the funeral a couple of weeks before Christmas.  Although we had a copy of his will (mum, me and sister are executors), we requested the orginal from the solicitors along with some other things we knew they had.  Citing Covid, it took almost 4 weeks to get the orginal will through (and that was missing all the other things we knew they had and had requested...

In the will it says
"If my wife survives me, I give my residual estate to my Executors to hold on the following Trusts:
- to pay income from residual estate to my wife during her life time...(then a little more about advance capital)
- After the death of my wife to hold my residual estate on the trusts in clause x and y"

Clause X and Y is 50-50 to me and my sister.  Other sections of the will it references STEP provisions/ Trustee Act.

Letter to Trustees explains that there is a life interest trust for mum, and on her death, life interest trusts form for my sister and I.

He was an exceptional man and was financially estute, so the estate is not small.

House is worth ~£1.4m (not got it valued yet), and was in Dad's sole name
Investments ~£1m (based on figures from early last year so could go either way).  Most, with the exception of ~60k looks like S&S ISAs/ investments. Possibility 400k of this entered into Trust on death.
Pension  - ~800k in a SIPP
Life Insurance ~£250k (direct into trust)
Shares - not a clue at this stage, the accountant has just given me a long list of possible shares going back a long time!
Chattels - not estimated at this stage

At this stage, key question, as everything has go into Life Interest Trust for mum, do we pay IHT now? I used the online gov IHT calculator and got a little confused (not difficult these days) with the question about what has been given to spouse - if the Trust counts as giving everything to her, then there's zero tax now, but if it doesn't count, then we have IHT to pay now?

If it does count and IHT isn't due now, I understand that if the estate is over £3m then we need to submit full details of the estate. Do SIPPs/ money straight to Trust count as a value for the estate?

Apologies for the length, and thank you in advance

Comments

  • Savvy_Sue
    Savvy_Sue Posts: 46,254 Forumite
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    I am sorry for your loss.

    One thing you could do is ask the solicitors to explain in plain English what you and your fellow executors need to know, and what the provisions of the 'trust' mean. Is half the house now your mother's, and the other half shared by you and your sister, with your mother allowed to live there for as long as she wishes? if that's the case, what provision is there for your mother to downsize, should she wish to? Note that they may well get very excited at this stage and offer to take the will to probate for you: that's not what you need, you just need advice on these provisions. They wrote the will, they took your father's instructions, they should know what he intended! 

    You can also ask the accountant for advice, and your mother might consider taking advice on mitigating the IHT due on her death. 
    Signature removed for peace of mind
  • Keep_pedalling
    Keep_pedalling Posts: 17,190 Forumite
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    The SIPP does not form part of the estate, but if he was over 75 when he died it will be subject to income tax. The insurance policy also falls outside the estate and is not subject to IHT or IT.

    The part of his estate going into the life interest trust will be subject to spousal exemption so will not be subject to IHT but will form part of your mothers estate for IHT purposes. Anything going to anyone else will use up some of his IHT NRB and IHT will be due if that exceeds £325k.

    With such a large estate I think you should take advice from a tax specialist as errors could be costly and to see what can be done to minimise your mother’s IHT liability although it might be a bit late in the day to achieve much in that direction. 
  • winterberry24
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    Thank you both.  Professional advice will be sought, I was just aware of a potentailly ticking clock if IHT needed to be paid now.
    At the moment I'm not particuarly impressed with the solicitors - still waiting for our copies to come through, and the letter that was sent with mum's offered no words of condolence (its the simple things) and proceeded to explain how they could deal with probate etc but would tell us how much they'd charge once we filled out a questionnaire (which looked idential to the IHT (400 i think) and the probate forms!
    I do have another solicitors that I'm planning on speaking to.  At least once we've spoken to them, we'll have a better understanding of things.  Def need something in "lay language" - something I do a lot in job in the medical field, but is definitely needed in the legal field too!
  • Pennylane
    Pennylane Posts: 2,713 Forumite
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    Thank you both.  Professional advice will be sought, I was just aware of a potentailly ticking clock if IHT needed to be paid now.
    At the moment I'm not particuarly impressed with the solicitors - still waiting for our copies to come through, and the letter that was sent with mum's offered no words of condolence (its the simple things) and proceeded to explain how they could deal with probate etc but would tell us how much they'd charge once we filled out a questionnaire (which looked idential to the IHT (400 i think) and the probate forms!
    I do have another solicitors that I'm planning on speaking to.  At least once we've spoken to them, we'll have a better understanding of things.  Def need something in "lay language" - something I do a lot in job in the medical field, but is definitely needed in the legal field too!
    Re your second para …. That’s because they want to know how much the estate is worth and how much money they can make! 😉   
  • winterberry24
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    Pennylane said:
    Thank you both.  Professional advice will be sought, I was just aware of a potentailly ticking clock if IHT needed to be paid now.
    At the moment I'm not particuarly impressed with the solicitors - still waiting for our copies to come through, and the letter that was sent with mum's offered no words of condolence (its the simple things) and proceeded to explain how they could deal with probate etc but would tell us how much they'd charge once we filled out a questionnaire (which looked idential to the IHT (400 i think) and the probate forms!
    I do have another solicitors that I'm planning on speaking to.  At least once we've spoken to them, we'll have a better understanding of things.  Def need something in "lay language" - something I do a lot in job in the medical field, but is definitely needed in the legal field too!
    Re your second para …. That’s because they want to know how much the estate is worth and how much money they can make! 😉   

    Yup, and I just thought what a cheek, at least try and sound as if you're being nice instead of money grabbing - at least they'd stand a better chance of getting our business!
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